Swiss sustainable finance growing, legal framework is missing

The success story for sustainable finance continues in Switzerland with a double-digit growth in the field in 2020. Based on the responses to a market survey performed by Swiss Sustainable Finance (SSF), which collects data on the funds and mandates reported by banks and asset managers and internally managed asset owner volumes, SI volumes increased by 31% to CHF 1,520.2 billion. As such, funds adopting sustainable investment approaches now exceed conventional investment funds for the first time ever, writes the SSF team in their summary on the study. Impact investments and sustainable thematic investments grew by 70%, respective 19% from 2019 to 2020. And the journey continues, I am sure that growth numbers will look similar for 2021.

 

Development of sustainable investments in Switzerland

However, it is getting more and more important to demonstrate the impacts of sustainable impact investments and to take a clear stand against greenwashing. With our study on the positive impacts of alternative proteins vs. animal base proteins we did exactly that and we are continuing on this path with Blue Horizon. Elsewhere in the financial world, the temptation to simply relabel existing investment products without really checking the impacts is growing. The Swiss Financial Market Supervisory Authority (Finma) and the Federal Council are taking on the issue as NZZ titled this month in an article on Greenwashing (paywall). “Clients are offered investment products which, because of their name, imply a positive impact on the environment and society, but which in very few cases achieve this impact. In our view, banks and asset managers are greenwashing,” was Greenpeace’s recent verdict as quoted in the NZZ article.

The Swiss francophone business newspaper Le Temps also commented on the latest developments on July 23 in an article titled “Brussels wants truly green bonds” (paywall). The climate measures announced by the European Union in July are following the “Next Generation EU” recovery plan designed to get out of the covid crisis and put Europe on a more sustainable path. To finance these initiatives, green bonds will play a central role. Therefore the EU unveiled a draft new standard for these instruments, which should come into force by the end of 2022. While the European Union has unveiled its green bond standard, Switzerland has no legal guidance in the area yet, the newspaper comments.

The EU standard is based on four main principles: projects financed by green bonds will have to be aligned with the EU taxonomy, which defines what is considered sustainable and what is not; the use of the funds raised will have to be fully transparent; the latter will be verified by external auditors; and these will be supervised by ESMA, the European Securities and Markets Authority. I believe that despite the current political distance between Switzerland and the EU, Switzerland will align its framework with the EU standards in the long term.