The term "vibe shift" seems to apply to the area called ESG - a term that has somewhat fallen out of use, even if concerns underlying it haven't done so. We talk to Geneva-headquartered Union Bancaire Privée about its approach.

As the term “ESG” – environment, society and governance – seems to have fallen out of use, with more talk of “sustainability" instead, it’s clear that pragmatism is now the order of the day.

A series of forces have changed the narrative. There was Russia’s February 2022 invasion of Ukraine that sent oil and gas prices up sharply; supply chain disruptions during and after the pandemic; worries about European countries’ defence gaps; and regulatory clampdowns on “greenwashing.” To show how far matters have changed, a crop of banks has started to launch defence-related funds – once unthinkable for some on the ESG side. (See articles here, here and here.)

Although the investment vocabulary has changed, that doesn’t mean that concerns about human-caused global warming, pollution, species and habitat loss, maltreatment of workers, corruption and poor corporate governance have ceased to be urgent. 

Robert de Guigné, group head of sustainability at Union Bancaire Privée, explained how the bank takes a practical approach to these issues, avoiding mistakes of a rigid approach.

“All these geopolitics had consequences on business fundamentals, on economies, and on the way that people prioritise sustainability integration in their investments,” de Guigné told WealthBriefing in a meeting at his offices in Geneva’s Rue du Rhône.

“After years of a world-saving complex followed by a period of regulatory dogmatism, it is now time for sustainable investment to enter the era of financial pragmatism,” he said. 

De Guigné said UBP emphasises its “PACT” framework to describe its sustainability approach: P for pragmatism and the need to understand what creates added value for clients; A for agility and having the ability to move and adapt fast; C for client-centricity and understanding what clients want, and T for transparency – to explain and report on what the firm does and why.

Sustainable investing needs to adjust to clients’ expectations, he said. This is a relatively new area, and standards have only developed around it in the past few years, he said.

There’s little doubt that there has been something of a “vibe shift” isince the pandemic five years ago. According to figures from Rothschild & Co in June this year, the global sustainable fund universe “endured its worst quarter on record in the first quarter of 2025,” registering $8.6 billion of net outflows, reversing the $18.1 billion in restated inflows seen in the final quarter of 2024. In total, global ESG fund assets remained steady at $3.16 trillion as of March 2025. The report said the main driver of first-quarter outflows was a wave of modest, yet notable, redemptions in Europe, the first time this has happened in Europe since 2018.

Mismatch
What needs to be considered, for example, is that the payoffs in terms of a cleaner planet, better treatment of workers and less corruption, take time, whereas investors hungry for returns tend to have a shorter time frame.

“In the end, people are interested in short-term returns, whereas sustainability is naturally inclined towards creating long-term value,” De Guigné said. 

Tactical adjustments are therefore important, such as the need to re-think whether defence-related investments enter the mix. “This sector has outperformed in markets. We should not be dogmatic in the approach but pragmatic,” he said. 

“We need to get in a tactical component there that lets us adjust to the quick evolutions of the international context,” De Guigné said. When the first funds classified as Article 8 under the SFDR were launched, most asset managers decided to implement integration of sustainability criteria through strict exclusion policies. 

For instance, the weapons manufacturing industry was excluded by many funds, he said. Initially, this ban applied only to companies producing what were deemed controversial weapons, but it was eventually extended to the entire defence sector. However, when the international geopolitical context became tense and wars broke out, these companies began to outperform and the necessity of supplying weapons to countries under attack to defend themselves became obvious and legitimate. This led to the question of whether to reintegrate these companies, excluding manufacturers of controversial weapons, into the allocations of Article 8 funds that was widely discussed among asset managers.

De Guigné said that for all the necessary adjustments, there are also limits. Some controversial weapons systems are banned under international treaties such as cluster munitions, cluster bombs, anti-personnel mines, or biological and chemical weapons. 

Due diligence on weapon manufacturers, their processes and the value chain around them is therefore essential, he said. “This makes much more sense than excluding the whole [defence] sector.”

The approach
Discussing how UBP evaluates firms, de Guigné explained that the bank will consider, for example, how sensitive a firm’s value is and performance to external ESG trends, such as global warming, social arrest, resource scarcity, and so forth. This measures the ESG risks of the company; how a company makes what it does and if its products and production processes have a negative impact on third parties; and what positive contribution the firm is making to the transition to a more sustainable economy, etc.

Firms that can provide solutions for issues that arise, such as when software can measure a producer’s carbon footprint and hence give information helpful in tackling it, are considered as positive contributors. 

“Companies that transform their business models to become more sustainable will gain a much larger market share,” De Guigné said. Conversely, companiesw with non-sustainable business models who are unwilling to change will become stranded assets, meaning their financial value will become worthless in the future.

There have been mistakes and approaches to investment down the years that haven’t worked out or had to be modified, and that’s entirely normal and healthy," he said. 

“You need to be agile and take into account all the messages you receive,” De Guigné added.