Nature is precious – and expensive. Potential and limitations of private finance 

The Swiss mountains are an excellent example of how risk and reward are two sides of the same coin: while tourism in Switzerland recently hit an all-time high, landslides caused extensive damage in the villages of Brienz and Blatten. Like many other things, nature provides vital input for most economic activities while also exposing them to risks. There is nothing new or surprising about this fact, but attitudes towards it are undergoing a fundamental shift.

Nature as a risk 

In December 2024, the Swiss Financial Market Supervisory Authority FINMA published its Circular 2026/01, which sets out its supervisory practice on the management of climate-related and other nature-related financial risks. The circular applies to both banks and insurers and will enter into force in stages starting on 1 January 2026. In line with international frameworks, its scope is deliberately broader than the age-old topic of climate. It aims to “strengthen supervised institutions’ resilience to these risks and thus protect their customers as well as the Swiss financial centre”. 

Nature as an opportunity 

However, nature also presents us with economic opportunities. One key basis for these is the Kunming-Montreal Global Biodiversity Framework, to which Switzerland – along with 195 other countries – signed up in December 2022. Switzerland has thus committed to halting the loss of nature and biodiversity as a result of unsustainable land use, pollution, climate change and other factors. Counteracting this pressure on Swiss nature requires investment. 

However, the amount of financing needed has never been quantified before. A study by Swiss Banking in conjunction with Boston Consulting Group sets out to correct this. For the first time ever, it offers a fact-based quantitative basis for discussion and collaboration with political decision-makers, financial institutions and other interest groups.

Switzerland’s growing need for investment 

To honour its international commitments to preserving nature and biodiversity, Switzerland needs to invest CHF 5.3 billion a year between now and 2050. It is estimated that the public sector will have to contribute 85% of funding in the ten financing areas identified by the study as most important for nature resilience. This is due to the large proportion of publicly owned assets involved and the limited profitability of many measures. Indeed, water/waste water infrastructure and regenerative agriculture are the largest financing areas, accounting for more than 75% of all required investment. 

The challenge now lies in making up the shortfall relative to the estimated current spending of CHF 3.2 billion a year. In view of the difference of CHF 2.1 billion a year or some 66% and the fact that public finances are set to remain strained, at least in the medium term, it seems essential to mobilise more private finance in order to achieve Switzerland’s nature-related goals.

Challenges, opportunities and limitations 

To ensure that Swiss banks can provide more of this capital going forward, a number of hurdles must first be overcome: stronger demand signals are needed, as are a pipeline of investable projects, more standardised data and common benchmarks to steer future measures. The limited financial returns on investments in natural capital mentioned above, together with fragmented metrics and a lack of standardised frameworks, pose a huge challenge.  

Market-driven mechanisms can help to improve economic viability and thus effectively mobilise private capital. Examples include blended finance to reduce the risks of projects that are not yet viable and public/private partnerships in infrastructure or services with stable money flows. 

Banks can support Switzerland’s nature transformation in a variety of ways. They can offer sustainable finance instruments such as green or sustainability-related loans and bonds, offer bespoke advice to customers – especially SMEs with restricted sustainability capacity – or enable funding wherever demand and project readiness meet through partnerships with ecosystem actors. However, banks only have limited scope to exert a direct influence.