Digital library on sustainable finance
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This survey report examines in detail sustainable investing and its impact on the alternative investment industry. Focusing on hedge funds and institutional investors, together with best practice from the asset management sector, the report investigates how sustainable investing is gathering momentum across the investment universe.
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This report published by WWF Switzerland and PwC Switzerland finds that the financial risks associated with the loss of biodiversity will become increasingly important in 2020. As climate change and the loss of biodiversity mutually reinforce each other, decision-makers face a huge challenge to respond to this double crisis, as the risk of financial market instability significantly increases.
The report suggests a typology of four financial biodiversity-related financial risks: physical, transition, litigation and systemic risks. The report further highlights what can be learnt from the discussions around climate-related financial risks, provides a framework on how to integrate biodiversity losses into the classical risk framework of financial institutions and also includes recommendations to financial regulators/central banks, financial market players and states/international organisations.
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Nature is too big to fail. Biodiversity: the next frontier in financial risk management - EN
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The second edition of the State of Impact Measurement and Management Practice reflects the increased sophistication and maturation of impact measurement and management (IMM) practices since the release of the survey’s first edition in 2017.
Based on data from 278 impact investors—including 109 two-year repeat respondents—this report provides the most comprehensive view of how impact investors assess their social and environmental impact, and the trends that have shaped IMM practices in the past two years. The report indicates that impact investors universally agree that IMM is imperative and it underscores how investors are increasingly focused on driving greater impact results.
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The State of Impact Measurement and Management Practice: Second Edition - EN
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This paper aims to assess the understanding of environmental, social and governance (ESG) considerations within the banking context and examines the current market practices in this area. To that extent this paper sets out the various definitions of ESG factors and also sets out how these then are converted into and treated as ESG risks. This paper relies upon the lessons learnt from a survey developed by the EBA to gain insights into current market practices with regard to credit institutions’ approach to incorporating ESG considerations into their frameworks.
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This report reviews the contributions, or lack thereof, of the world’s 25 largest asset managers to hold large U.S. energy and utility companies accountable to combat climate change and the risks it poses to long-term shareholders and other stakeholders. With increasing concentration in the investment industry, these 25 firms collectively manage over $38 trillion and account for over 51% of the assets managed by the 400 largest asset managers worldwide. The report comes to the conclusion that the world's largest asset managers often used their shareholder power to undermine global investor efforts to hold recalcitrant fossil fuel and utility companies accountable for their failures on climate and their irresponsible lobbying.
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Climate In The Boardroom: How Asset Manager Voting Shaped Corporate Climate Action In 2019 - EN
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The Institute of International Finance (IIF) and European Banking Federation (EBF) conducted a joint survey of their members. The survey of 70 financial firms around the world, with total assets of nearly $40 trillion, finds that the streamlining of measurement and disclosure frameworks, and increased international collaboration, are key to strengthening the climate-related risk analysis and reporting toolkit.
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This paper uses firm-level data on green bonds issued by public companies, to examine companies’ financial and environmental performance following the issuance of green bonds. The author finds that the stock market responds positively to the announcement of green bond issues, and also documents a significant increase in environmental performance, suggesting that green bonds are indeed effective in improving companies’ environmental footprint. However, these findings are only significant for green bonds that are certified by independent third parties, suggesting that certification is an important governance mechanism in the green bond market.
This paper was published in Environmental and Energy Policy and the Economy 1, no. (2020): 95-128.
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Green Bonds: Effectiveness and Implications for Public Policy - EN
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A challenge that companies (including financial institutions) face in demonstrating long‑term value creation is the absence of a generally accepted international framework for the reporting of material aspects of ESG and other relevant considerations for long‑term value creation. This contrasts with the well‑established standards that exist for reporting and verifying financial performance.
The subsequent report therefore proposes a common, core set of metrics and recommended disclosures that can be used to align mainstream reporting and, in so doing, reduce fragmentation and encourage faster progress towards a systemic solution, perhaps to include a generally accepted international accounting standard. The metrics and disclosures proposed have been organized in four pillars that are aligned with the SDGs and principal ESG domains: Principles of governance, Planet, People and Prosperity.
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Toward Common Metrics and Consistent Reporting of Sustainable Value Creation - EN
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This survey assesses the current state of alignment of listed European companies’ economic activities and banks’ lending activities with the EU Taxonomy for sustainable finance.
Commissioned by the German Federal Ministry for the Environment, the survey also aims to to identify potential challenges in and potential solutions for measuring taxonomy alignment, raise awareness and build capacity regarding the EU taxonomy. The results help to inform the ongoing discussions on the EU Taxonomy at the EU level and to maximise the relevance and usability of the EU Taxonomy for key stakeholders, in particular listed companies and banks.
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This publication is a collaboration between climate economists, climate financial risk modellers and financial regulators, and applies the CLIMAFIN framework described in Battiston at al. (2019) to provide a forward-looking climate transition risk assessment of the sovereign bonds’ portfolios of solo insurance companies in Europe. It was published in the European Insurance and Occupational Pensions Authority (EIOPA) December 2019 Financial Stability Report.
The authors consider a scenario of a disorderly introduction of climate policies that cannot be fully anticipated and priced in by investors. They find that the potential impact of a disorderly transition to low-carbon economy on insurers portfolios of sovereign bonds is moderate in terms of its magnitude, but non-negligible in several scenarios. Thus, climate policy scenarios should be regularly monitored and assessed given the importance of sovereign bonds in insurers’ investment portfolios.
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2019 Thematic Review - Climate risk assessment of the sovereign bond portfolio of European insurers.pdf - EN (pdf 512.1 kB)Summary
This publication, part of the SSF Focus series, provides an overview and status report of five of the key EU sustainable finance initiatives most relevant to Swiss financial institutions. The publication also contains a section on how Swiss institutions may be affected by the EU legislative measures, providing suggestions on a possible course of action. Additionally, the Focus looks at Swiss policy-related developments occurring in the area of sustainable finance.
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Focus: EU Action Plan on Sustainable Finance. Effects on Swiss Financial Institutions. - EN
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This scientific article (in German) puts forward the awareness of the issue of climate change has risen markedly in recent years, there are still open questions with regard to what legal consequences climate change entails - especially from the investor's point of view.
In the authors' view, institutional investors are already obliged under current law to take appropriate account of climate risks and opportunities as part of their fiduciary duty of care. They believe that increased self-regulatory efforts in the form of detailed industry recommendations on climate risks would be welcome, with the need for regulation in Switzerland to remain to be assessed. The authors underline that the transition towards a decarbonised society, including the climate compatibility of financial flows, to which Switzerland has committed itself in accordance with the Paris Agreement, is an urgent endeavor.
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Der Klimawandel und die Finanzmaerkte (pdf 858.8 kB)Summary
The Partnership for Carbon Accounting Financials (PCAF) is an industry-led initiative that helps financial institutions assess and disclose their indirect greenhouse gas (GHG) emissions related to their financial activities. This document is the first version of the Facilitated Emissions Standard. It provides detailed methodological guidance for the measurement and disclosure of GHG emissions associated with capital market transactions.
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From late 2018 to early 2019, the Center for Sustainable Finance and Private Wealth (CSP) at the University of Zurich conducted its third round of research on the sustainable investing (SI) capabilities of private banks.
The report examines the sustainable investing vision, offering, and services of 20 European banks and features special chapters on the impact of the EU Action Plan on Financing Sustainable Growth and private banking and its alignment with international environmental goals. The authors found that in comparison to 2018, banks’ offerings have improved in terms of both range and depth.
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This report looks at whether ESG factors add to, detract from, or have no effect on financial return for Emerging Market (EM) equities. Based on a decade of historical data, the authors analyse the risk/return profile of the Candriam ESG Emerging Markets universe.
The study found that over the period with sufficient testable historical data, an approach combining governance, controversy risk analysis and exposure to sustainability themes enhanced investment performance in emerging markets equities in ten out of eleven years (April 2008 through October 2018).
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The Impact of ESG Investing in Emerging Market Equities - EN
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The "IFZ Sustainable Investments Study 2019. Nachhaltige Bonds und nachhaltige Fonds" conducted by the Lucerne University of Applied Sciences and Arts assess the offering of sustainable mutual funds in the Swiss fund market for the third year in a row.
According to the study, the assets of sustainable mutual funds in Switzerland have risen by 22 percent to CHF 196 billion and counting 582 sustainable funds over the past year, while conventional mutual funds declined slightly over the same period. The report contains an overview of the largest sustainable funds in Switzerland.
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Achieving the United Nations Sustainable Development Goals (SDGs) will require at least an extra $2.5 trillion a year, between 2015 and 2030. In order to bridge this investment gap, investment vehicles with an ESG or SDG dimension will play an important role. One vehicle that offers this potential is ESG ETFs — exchange traded funds (ETFs) based on corporate environmental, social and governance (ESG) factors.
This report, released by UNCTAD in cooperation with Conser and TrackInsight, aims to provide an overview of the ESG ETF landscape, examine the main drivers behind the rapid rise of ESG ETFs in recent years and discuss possible actions that can be taken by key stakeholders to grow ESG ETFs into a mass market financial vehicle for sustainable development.
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Leveraging the Potential of ESG ETFs for Sustainable Development - EN
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This legal opinion commissioned by the Swiss Federal Office for the Envrionment (FOEN) shows that material climate risks already have to be taken into account to a large extent in current law. On a voluntary basis, climate impacts resulting from investment and financing decisions can also be measured and reported.
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Gutachten_Eggen_Stengel_11.11.2019 (pdf 513.8 kB)Summary
This report by climate-change think tank InfluenceMap analyses the world’s 15 largest investment institutions, with $37 trillion in assets under management, and found that they are collectively deviating from the “Paris-aligned” allocations needed to reach the Paris Agreement goal of stopping global temperatures rising by 2°C. The report found $8.2 trillion invested in four top-polluting industries: oil and gas, coal mining, automobiles and electric power. While the Paris-misalignment of oil & gas should not come as a surprise, widely held automative and electric utilities sectors remain seriously out of line on climate.
Increasingly, forceful engagement with companies in these sectors must occur if the finance sector wishes to align its portfolios with Paris Agreement. However, the study found that investor-company engagement is often opaque and ill-defined. Only three big firms ― UBS Asset Management, Allianz and Legal & General ― “strongly and consistently engage with the companies they invest in to align their business models with Paris targets.”
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FinanceMap_Report_Nov_2019_Final (pdf 3.1 MB)Summary
This paper reviews the evolution of private-sector development finance in Switzerland from 2010 to 2018. It analyzes the contribution of Swiss managers specialized in impact investing towards the financing of Sustainable Development Goals (SDGs), focusing on the historical growth of their assets under management and the variety of products on offer.
The report is a follow up to the Swiss Microfinance Investments Report 2015 published by Symbiotics.
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This first-ever global insurance industry guide highlights the increasingly important role that the industry needs to play in protecting World Heritage Sites.
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Protecting our World Heritage, Insuring a Sustainable Future - EN
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This paper provides guidance for banks and other financial institutions to implement the recommendations of the OECD Guidelines for Multinational Enterprises in the context of their corporate lending and securities underwriting activities. Specifically, this paper explains what due diligence for responsible business conduct entails, and provides practical considerations for banks at each step of the due diligence process. This paper may also be helpful to other stakeholders seeking to understand due diligence approaches of banks.
The paper was developed in close consultation with leading global banks, civil society and trade unions, and approved by 48 governments.
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Due Diligence for Responsible Corporate Lending and Securities Underwriting - EN
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This is the final report of the UN PRI's "Fiduciary Duty in the 21st Century" programme, which intended to clarify investor obligations and duties (fiduciary duties) in relation to the integration of ESG issues.
The report affirms that fiduciary duty requires the incorporation of ESG issues into investment analysis and decision-making processes. It describes how this integration of ESG issues is an increasingly standard part of the regulatory and legal requirements for institutional investors, along with requirements to consider the sustainability-related preferences of their clients and beneficiaries, and to report on how these obligations have been implemented.
The report also identifies areas where further work is required and reflects on how investors’ duties and obligations may further evolve over time.
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The IOPS Supervisory guidelines on the integration of ESG factors in the investment and risk management of pension funds highlight a range of challenges to be met by pension funds governing bodies, asset managers and pension supervisors.
The guidelines provide guidance and propose a number of actions to be taken by pension supervisory authorities, intending to help pensions supervisors to oversee pension funds more effectively by integrating ESG factors. While they are non-binding, the IOPS encourages supervisory authorities to voluntarily adopt and implement the guidelines.
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This guide is a hands-on approach aimed at central banks that wish to adopt Sustainable and Responsible Investment (SRI) practices. It builds on the results of an SRI portfolio management survey among NGFS members and concludes with case studies of first-hand experiences by some NGFS members.
Among the five SRI strategies identified in the guide, the most prominent are green bond investments and negative screening for equity and corporate bond holdings.The survey shows that there is a growing momentum among NGFS members: 25 out of the 27 respondents have already adopted SRI principles in their investment approach or are planning to do so. Those principles range from a broad scope of environmental, social, and governance (ESG) considerations to a climate-specific focus. As the mandates and status of central banks differ, the guide does not offer a one-size-fits-all solution, but discusses potential SRI approaches and ways to implement them, allowing central banks to account for their own specific challenges.
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A sustainable and responsible investment guide for central banks’ portfolio management - EN
