Swiss government to upgrade financial sector’s climate ratings to bolster credibility

The Swiss Federal Council has announced that its financial centre should further enhance its credibility and international competitiveness in the increasingly important area of climate transparency of financial products. The Council decided at its meeting on 8 December 2023 to further develop the nation’s voluntary Swiss Climate Scores introduced in 2022. The Swiss Climate Scores provide institutional and private investors with comparable information on the extent to which their financial investments are compatible with international climate goals. When they were introduced in 2022, the Federal Council announced that it would regularly undertake reviews, adapt the measures to the latest developments as necessary and investigate the voluntary uptake by Swiss financial market players. Some aspects of the updated Swiss Climate Scores, which will apply from 1 January 2025, have been refined in order to facilitate their implementation by the industry and increase their comprehensibility for investors. The Council said that optional questions are now being asked on the climate-related investment goal, with financial institutions stating and justifying whether a financial product is climate aligned or contributes to mitigating climate change. In addition, exposure to renewable energies must now be disclosed alongside the exposure to fossil fuels. The Federal Council recommends that Swiss financial market players create comparable and meaningful transparency on climate alignment for all financial investments and client portfolios and, where appropriate, apply the Swiss Climate Scores. In 2024, the Federal Department of Finance (FDF) unit SIF will examine the state of voluntary uptake. “The Swiss Climate Scores contain indicators that not only reflect where global companies in the financial product or portfolio currently stand, but also show where these companies are headed in relation to global climate goals (net-zero target by 2050). Net zero means that global emissions of greenhouse gases may not exceed the amount that can be absorbed by natural and technical sinks,” explained the Council. In reaction to the news from the government, the Swiss Bankers Association (SBA) said that it is already “actively encouraging” the banking industry to use the Scores. The financial sector is currently in the process of implementing them in support of the Federal Council’s goal of making Switzerland a leading hub for sustainable finance, it said. The SBA added that the Scores deliver transparency and comparability regarding the Paris alignment of financial investments in an easy-to-understand way and allow climate-conscious investors to make informed investment decisions. “This puts Switzerland at the forefront of a global movement, positioning it as the first choice for Swiss and foreign investors seeking to invest sustainably,” said the association, adding that the Scores actively prevent greenwashing. The SBA also said that, in addition to the Swiss Climate Scores, the Swiss financial centre has launched a series of sector initiatives designed to progressively enhance its status as a hub for sustainable finance as well as its overall credibility. They include the SBA recommending that its members participate in net-zero initiatives that are appropriate to their business models and self-regulation on sustainable finance that explicitly targets greenwashing. The SBA has argued strongly that self-regulation is the way forward on greenwashing, but in late October the Swiss government announced that it would tighten its rules on what can be described as environmentally friendly investments, and so clamp down on greenwashing. The FDF said it plans to draft a bill to regulate greenwashing. A draft for consultation should be available by August 2024 at the latest. However, according to state news service Swissinfo.ch, the finance department said the door remains open for the industry. If the financial industry puts forward a form of self-regulation that effectively implements the government’s position, the finance department will refrain from further regulation, it said according to the news service. In response to this prospect, the Swiss finance sector, including the insurance industry, promised to up its game to avoid the need for external regulation. “The Asset Management Association Switzerland (AMAS), the Swiss Bankers Association (SBA) and the Swiss Insurance Association (SIA) reject any form of greenwashing,” said the three groups in a joint statement. “AMAS, the SBA and the SIA have already taken measures to avoid greenwashing since 2022 due to this motivation. They will implement the Federal Council’s call to further develop the self-regulations together with the relevant stakeholders. The three associations remain convinced that self-regulation is an effective and, compared to principle-based regulation, more flexible instrument to avoid greenwashing,” they continued.

Swiss government to upgrade financial sector’s climate ratings to bolster credibility

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