Evolving landscape of Swiss private banking and the benefits for sustainable investment

Over the past 15 years the number of private banks in Switzerland has halved, down from 156 in 2010 to 83 this year, with expectations this number will further decline by year end.

Despite this, Swiss private banks currently manage a record CHF 3.4trn in assets under management (AUM). Banking is one of the more important sectors of the Swiss economy, accounting for over 5% of gross domestic product, employing some 160,000 highly qualified people and generating annual tax revenues of CHF 7bn. 

The 2025 KPMG Private Banking Report highlights how the Swiss private banking industry is undergoing a major transformation driven by macroeconomic shifts, regulatory pressure, client demands, and technological disruption. KPMG notes Swiss banks are refocusing their strategies to address shrinking margins, increased competition, and the need to deliver hyper-personalised, digital-first services to a younger, more globally mobile, and sustainability-minded clientele.

The KPMG report underscores four key themes:

• The redefinition of client relationships through more proactive, advisory-driven engagement
• The use of advanced analytics and AI to create smarter, tailored service models
• A growing emphasis on ESG integration and purpose-driven investing
• A strategic partnerships with fintechs and wealthtechs to innovate at scale.

While operational cost pressures remain high, top-performing banks are shifting to agile operating models, revamping legacy IT, and prioritising the retention and sourcing of talent skilled in management, technology and advisory.

Amid persistent geopolitical and market volatility, risk management and regulatory compliance continue to demand significant focus. Ultimately, private banks that successfully transform will be those that combine digital excellence, trusted advisory, and forward-looking investment capabilities to meet evolving client expectations and achieve sustainable growth.

Many banks report the anticipated pace of change in the next five years will be greater than in the past two decades. Digitisation is transforming the industry at a pace most cannot keep up with, with acceleration in everything from system infrastructure to asset types, authentication protocols, risk controls, trade exchanges, and risk reporting. The next five years are expected to bring more change than the past two decades.

Is there a future for sustainable finance?

It is hard to think the answer here is a clear yes. 2025 finds the sustainable investment landscape beset by shifting policies, mixed fund flow, weak performance and political headwind. The first quarter of 2025 was the worst on record with ESG fund experiencing large out-flows, although total assets in global ESG funds remained high at roughly $3.16trn.

Despite these challenges research from Morgan Stanley Institute for Sustainable Investing reported in March 2025, the interest in sustainable investing remains consistently high across Europe, North America and APAC.

From a demographic perspective, the research shows interest from Gen Z and millennials is high, pointing to the importance of the topic in the next generation of inheritors. And here is where it gets interesting. The world is on the brink of the largest intergenerational transfer of wealth in history with $83trn expected to be passed on to the younger generation within the next two decades.

For private banks this means it is critically important to engage with private wealth owners and their next gen family members in meaningful, values-based discussions about long-term sustainability issues and their impact on wealth management.

Also, it is important to highlight the majority of investors from the survey say their interest in sustainable investing has significantly, or somewhat increased in the past year. 

Research from BNP Paribas confirms this sustained focus on ESG and sustainability objectives. The research, spanning asset owners, asset managers and private capital firms across 29 countries representing $33.8trn in assets, showed 87% indicate their focus on ESG remains unchanged, while 84% believe the pace of progress of sustainability is either going to continue or accelerate between now and 2030.

Growth of private markets in private banking?

With all the change in the industry it is no surprise the traditional 60/40 portfolio allocation approach is under question, especially given the proliferation of digital tools that offer a wide range of security types, rapid risk modelling and the ability to offer alternative combinations to achieve appropriate risk-adjusted outcomes, at a reasonable cost.

In this regard, private market assets are gaining a lot of momentum within private banking, driven in part by easy access via digital fund platforms, such as I-Capital, and smaller ticket sizes and the opportunity to direct exposure towards the next wave of green growth. While the private markets space has traditionally been dominated by institutional investors, this is quickly changing with over half of capital raised from private wealth clients.

Fuelling this is the rise of the evergreen fund structure which provides quasi- liquidity. Some see this boom as similar to the hedge fund boom of 2008 and caution that evergreen structures work based on continual deal flow and successful exists. Further cautioning that there is wide dispersion of returns and the difference in the sub asset classes needs to be well understood ie real estate vs infra vs PE, private debt.

Notwithstanding this, there is genuine value to be unlocked for private market investors and along with the potential for meaningful real world positive impact. It just requires caution, care and a long-term mind set.