How our financial centre is becoming a magnet for green investment
First published in the Weltwoche of 24.2.2022.
Swiss banks are aiming to lead the world in sustainable finance expertise. This requires intensive competition as well as clear goals and requirements within the industry and total transparency on the part of all companies involved.
Since the United Nations adopted its 17 Sustainable Development Goals (SDGs) in 2015, the volume of assets invested sustainably in Switzerland has risen more than tenfold from CHF 140 billion to over CHF 1,500 billion. This figure comes from the Swiss Sustainable Investment Market Study 2021 published last year by Swiss Sustainable Finance in conjunction with the University of Zurich’s Center for Sustainable Finance & Private Wealth.
Priorities and expectations
This underscores the huge opportunity sustainable investment presents for the Swiss financial centre. It is also a major commitment, given how urgent some sustainability goals are, so let us take a closer look at what is needed.
Sustainability is a very broad and complex topic. The UN SDGs help to break it down. Firstly, they can each be attributed to the three widely accepted categories: environmental, social and governance. Then they can be divided up into basic needs, health, inclusive economy, healthy ecosystems, climate stability and responsible society.
This way of looking at it makes one thing immediately clear: in the current debate on sustainability, a range of different groups, states and regions attach widely differing importance to individual goals. These differences often lead to conflicts between goals.
One prominent example of this is the European Commission’s proposal to allow gas and nuclear power to be regarded as sustainable energy sources in the EU Taxonomy, a system for classifying financial instruments in terms of sustainability.
The Swiss financial centre serves customers from all over the world with a very broad spectrum of needs, priorities and expectations that require a credible response. Besides meticulously recording customers’ preferences as regards sustainability and providing them with sufficient information on the topic, applying different classifications for different sustainability goals will be essential.
Some customer groups will see reducing CO2 emissions as their highest priority. The Glasgow Financial Alliance for Net Zero offers a convincing approach here. European customers, meanwhile, will have to comply with the regulations governing the EU Taxonomy.
Others will demand equal consideration of all 17 UN SDGs. They would be best served by a best-in-class approach based on data from Sustainalytics or MSCI ESG Research.
Sustainable investment requires companies to be fully transparent at all times.
We bankers do not make laws, and we cannot make decisions on assets that do not belong to us. What we can do is advise our customers, and we need to make sure that we can offer them advice that is credible and easy to understand along with products that suit their needs and transparent reporting.
This brings me to another important point: sustainable investment requires companies to be fully transparent at all times. The necessary information and data must available to ensure that shares and bonds, which are fundamental to almost all financial products, can be appropriately valued, filtered and classified. Companies that do not have any outstanding shares or bonds need transparent reporting to ensure that any lending they engage in can be assessed in terms of sustainability.
Reporting that is standardised as far as possible is an essential prerequisite for all efforts and goals concerning sustainable investment and finance. The onus here is on the real economy – meaning all companies, regardless of their size and business.
Let us imagine that the Swiss financial centre possesses the world’s broadest and deepest expertise in sustainable investment and finance. Now let us imagine that we can offer our customers, be they savers, high-net-worth individuals or institutional investors, the world’s most diverse range of sustainable products and services as well as the most informative and transparent reporting on the sustainability of their investments and assets. If we as an industry can live up to this ambition, we will draw in assets from customers all over the world who are looking for precisely the kind of advice and products we offer.
By responding to new and ever-changing customer needs, we can tap into a very attractive area of business while at the same time making an effective contribution to the political goal of directing financial flows towards sustainable and environmentally friendly activities.
Self-regulation is the way forward
This is the ambition of the institutions that belong to the Swiss Bankers Association. To achieve it, we are currently working on a catalogue of self-regulation that covers advisory services, products and reporting. At the same time, we have launched a series of initiatives aimed at making sustainability integral to the financial centre’s education and training programmes.
Some Swiss banks are pioneers of sustainable investment and already have decades of experience in this field. Through clear goals and requirements as well as intensive competition, we intend to realise our vision of becoming the leading financial centre for sustainable investment and finance.