Financing the climate transition

Financing Switzerland’s climate transition is manageable 

If Switzerland is to achieve its net-zero target by 2050, the Swiss economy must adopt more sustainable practices. The investments needed for this transition will be substantial but nevertheless appear manageable from a current perspective: 

• Switzerland’s climate transition will cost a total of CHF 387.2 billion over the next 30 years, equivalent to some CHF 12.9 billion a year or around 2% of annual gross domestic product. Investments on this scale will allow the necessary reduction in greenhouse gas emissions across the ten highest-emitting sectors of the Swiss economy, with light and heavy road traffic and buildings accounting for the largest share. 

• Over 90% of the investment needed can be financed by banks’ traditional offering. In addition to bank loans and mortgages totalling CHF 10.7 billion (83% of the annual investment requirement), another CHF 1.0 billion (8%) could be financed through the Swiss capital market. Based on the current volume, the bank loans needed to finance the climate transition would equate to around 10.8% of the mortgages and corporate loans issued every year by Swiss banks. The funding required through the capital market – around CHF 1.0 billion – would account for 1.6% of annual bond issuance on the Swiss Stock Exchange. 

• The remaining amount includes investments of CHF 0.9 billion involving public goods that are traditionally state-funded – expanding public transport, for instance. That leaves CHF 0.3 billion for which funding poses a challenge in addition to the relative immaturity of the necessary technologies. Blended finance or public-private partnerships (PPPs) could offers solutions here. 

Besides private transition financing, blended finance is one of the most interesting alternatives. It involves using public development funding to activate private capital flows for projects in emerging and developing countries. This reduces the inherent risks and thus makes projects with significant environmental and social benefits in particular accessible for private investors. The SBA published a discussion paper on the subject in 2024 that looks in depth at the opportunities and risks this new form of financing entails. 

Implementation is a shared challenge for government, investors and the financial centre 

The SBA is convinced that, through its financing activities, the Swiss financial centre can and will make an important contribution to Switzerland’s coming transition towards a sustainable economy and thus to the achievement of Switzerland’s net-zero target by 2050. However, the financial centre cannot make this transition happen alone. It is a shared task: the State must create reliable frameworks and incentives that enable businesses and citizens to invest in sustainable projects. Companies across all sectors, as well as private individuals – in their capacity as homeowners and transport users, for example – must invest accordingly. Banks can effectively support this transition by offering suitable products and services as well as advice on financing options. 

Optimal government frameworks 

The regulator can take a “green supporting” approach by creating regulatory incentives for eco-friendly financing. Suitable disclosure of climate-related information about the companies and projects being financed is an important prerequisite for financing. Regulatory or tax hurdles, along with restrictions on financing activity, must be avoided. Only a strong financial centre will be able to play a key role in financing Switzerland’s transition to a low-carbon economy.