Progress made by Swiss insurers on climate compatibility

The Swiss Federal Office for the Environment (FOEN) and the Swiss State Secretariat for International Finance (SIF) have carried out a climate compatibility test using the Paris Agreement Capital Transition Assessment (PACTA) method and found that significant progress has been made by Swiss insurers.

Some 20 insurers had their portfolios tested for their climate compatibility as part of the exercise, which was carried out for the third time this year, after 2017 and 2020. “The results of the third round show that some companies are well on their way to net zero, but further action is needed across the industry to make financial flows more climate-friendly,” concluded the Swiss Insurance Association (SIA) in a statement issued in late November.

The PACTA test is used to check financial portfolios with regard to their climate compatibility, using a variety of indicators.

A total of 133 financial institutions volunteered to be tested in the third round, having submitted a total of CHF2300bn in assets. Moreover, half of all real estate owned by institutional investors as well as Swiss residential buildings covered by mortgages were examined.

The SIA has supported the voluntary climate test initiative from the start. This year it recommended its member companies to “seize the opportunity” of the assessment. The association said that, overall, 20 private insurers, who submitted combined assets of CHF342bn, participated in this year’s climate compatibility test. Compared to 2020, insurers subjected more portfolios to the analysis.

“The number of insurers who again took part in the PACTA climate test shows that our industry is committed to greater transparency and a sustainable financial centre,” said Kristine Schulze, sustainability specialist at the SIA.

While the results of the third climate compatibility test reveal further need for action, they also highlight that the number of good examples is increasing across all asset classes in the financial sector, said the association.

The progress made towards climate neutrality by a number of Swiss insurers shows that the financial market can make an important contribution to reducing climate change, and that the federal government’s strategy of orienting itself towards the primacy of market-based approaches is working, said the SIA.

The SIA added, however, that further measures are needed across the entire financial sector in order to stay on track with the Paris Agreement climate targets. One key to this might be what is known as ‘peer learning’, in which financial sector companies share examples of their best practices with each other and support one another on the way to climate neutrality.

“The SIA wants to play an important role in this discourse and promote the exchange between its member companies and other industry representatives,” said Schulze.

For the SIA, anchoring sustainability is a key element of its 2020-2024 strategy. It published its third sustainability report this year to be able to present this commitment and the progress made more transparently.

The report summarises the sustainability efforts in the Swiss insurance industry with a focus on capital investments.

“In addition to capital investments, insurers also have effective leverage in the areas of prevention, underwriting and product management to contribute to a more climate-friendly economy,” explained Schulze.

In order to “continue resolutely” on the path towards sustainability, the SIA has also joined the Net Zero Asset Owner Alliance as a supporter.