Sustainable finance: on track, more potential ahead
The Swiss financial centre has a long tradition in the area of sustainable finance: the first sustainable financial instruments were launched in Switzerland in the 1980s. In the 1990s, the first asset management company focusing solely on sustainability was established in Switzerland.
Swiss financial institutions are among the leading global players in offering and marketing both innovative financial instruments in general as well as in the area of sustainable finance. At the end of 2019, around one third of professionally managed assets in Switzerland were invested sustainably, and the trend is set to continue to rise sharply. The recent market study published by Swiss Sustainable Finance provides impressive evidence of this. In 2019, the total volume of sustainable investments reached CHF 1,163.3 billion, representing market growth of 62% compared with the previous year.
In terms of clients, both private and institutional investors increased their sustainable investment volume in absolute terms. The Market Study 2020 once again underscores the dominance of institutional investors in this segment, who account for 79% of all sustainable investments in Switzerland. Compared with the previous year, however, the private segment is catching up rapidly: at 185%, growth last year was impressive.
New guidelines for the advisory process for private clients
It is precisely in this segment that the SBA still sees a great deal of potential, which it is therefore addressing with a sector initiative. The recently published Guidelines focus on consideration of ESG criteria (environment, social, governance) in the advisory process for the management of private client assets. In this way, SBA aims to ensure that private investors continue to catch up in this space and that their needs are taken into account to an even greater degree in the implementation process.
The guidelines consider the entire advisory process and provides insights on how sustainable criteria can be integrated into planning. This is important because planning brings together the client process with product and services processes. At this interface, the course for implementation is set. In addition to standard client considerations (such as risk/revenues/liquidity), sustainability aspects are incorporated as a further dimension. These sustainability aspects are fleshed out in investment management as so-called ESG factors, intended to make sustainability tangible for clients as an integral part of the overall service.
SBA opted for guidelines as the most suitable instrument for this matter. Although they are non-binding, they show that the topic is a high priority for banks, as they were developed in close collaboration with member banks and are therefore broadly supported with a clear focus on effectiveness.
To ensure that they take the diverse Swiss banking landscape into account, the guidelines are principles-based. Two principles have been assigned to each of three subject areas, thus covering the relevant blocks in the advisory process.
The guide is aligned with FinSA. These principles can therefore be incorporated into the work currently ongoing to implement FinSA, take effect quickly and further support the positive momentum.
The guidelines are a sector initiative of Swiss banks. However, in the interests of competitiveness and in order for Switzerland to become a leading hub for sustainable finance, the framework conditions must also be further developed (as outlined in our publication on basic positions and effective approaches).