Interview with Silvia Ruprecht

Silvia, what have been the most important advances in sustainable finance in Switzerland over the last 10 years and to what extent do you think SSF has contributed to them?

Overall, we clearly see increased awareness in the financial sector and the broader public for the topic. SSF mainly contributes to this sensitisation. Many advances driven by the federal government including FOEN have been already listed in the latest interview with Christoph Baumann, SIF. Key advances were the Federal Council’s sustainable finance strategy, the adoption of the Climate and Innovation Act, the first mandatory reporting requirements with a call for net-zero transition plans (so called “TCFD-Ordinance”), as well as the implementation of the regular PACTA Climate tests. I also fully agree with the important levers named in his interview.

In addition, I would like to highlight the federal council’s position on the prevention of greenwashing as a major step forward. The clear distinction, which financial products can be labelled as sustainable, was key: only those, that aim to align or contribute to achieve a specific sustainability goal. Products, which only integrate ESG risks and optimise performance cannot be named sustainable. SSF underlined this distinction with investment volumes in its market study and thereby fostering transparency (see Eurosif Methodology vs. others). This distinction is also important when it comes to the financial sector’s role in reaching the climate goals. Lately this fact was endorsed by the Swiss population in the vote on the Climate and Innovation Law.

What is the contribution of the Climate and Innovation Act (KlG), that was adopted by the Swiss population last year, to achieve the climate goals including the financial sector’s role?

The 2050 net zero goal is now enshrined in law. The act sets climate targets mainly for the real economy, but it also anchors the net zero alignment of financial flows as a main goal. It requires all Swiss companies, including financial institutions, to reach the objectives. To achieve this, corporate net-zero transition plans will play an important role. The minimum requirements for these plans will be defined in the Climate Protection Ordinance. As minimum requirements for financial portfolios differ significantly from those for real economy companies, specific minimum requirements for financial institution’s net-zero transition plans will be proposed in the Ordinance on Reporting on Climate Matters (often also called “TCFD-Ordinance”).

Beside the alignment goal, the KlG stipulates an impact goal: the Confederation shall ensure, that the Swiss financial centre effectively contributes to reaching the climate goals (Art. 9). To determine the status and progress by the Swiss financial sector, the voluntary climate tests shall be anchored in the respective ordinance.

The Federal Council has introduced the PACTA Climate test to measure the climate alignment of Swiss Investments. How do you rate the results of the latest test?

The test 2024 is still ongoing. We expect the results by beginning of November. We again expect a broad participation from all sectors: banks, asset managers, insurers and pension funds. The test contains a comparable, quantitative analysis of global listed equity and corporate bonds as well as Swiss real estate and mortgage portfolios. In addition, we capture financial institution’s climate strategies and action with a qualitative survey.

Real estate and mortgage asset classes are a key focus of the 2024 test round. We also offered new tools in this area. Through these asset classes the financial market is closely linked with the national building sector – in 2022 we covered more than half of all Swiss residential buildings through mortgage portfolios. In this test round, we would like to find out more about the evidence for climate impact by borrowers as a result of different incentives. The second focus is on the extent to which current and proposed (self-)regulations and recommendations on transparency made by the federal government and industry associations have already been implemented.

Nature Finance has become a more prominent topic in finance lately. Does the experience with climate finance lead to a faster adoption of nature finance?

We will see with the PACTA 2024 results by how much the attention for the broader nature topic has grown. FOEN is exploring if a quantitative assessment tool could be added in the next climate test round. As learnings from climate, I expect:

• A clear distinction in strategy, assessment, action and advertising if a financial institution’s action aims to reduce financial risk or if it aims to align with or clearly contribute to reach nature goals to avoid greenwashing.
• A sectoral approach for assessment, action and reporting, as the different economic sectors have different roles to play in the transition of the global economy to different nature related goals.

Where do you see Sustainable Finance in 10 years' time?

It’s pivotal that the net zero transition accelerates in all sectors. This means a strong call for action aimed at all stakeholders.

In line with the federal council’s position and definition of sustainable finance, in ten years, I would like to see all investment as well as lending products and portfolios by default being sustainable. In addition, I expect real economy as well as financial market actors to have set up, published and implemented meaningful net zero and nature positive transition plans. These plans should contain action, that significantly contributes to reach the net zero goal and helps create majorities for effective and “right” policy frameworks for the acceleration needed.

September, 2024