SwissBanking
The online magazine of the Swiss Bankers Association
December 13, 2019

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A lighthouse doesn’t have to be big; it has to be bright!

A lighthouse doesn’t have to be big; it has to be bright!

Which country can claim that sustainability is embedded in its constitution? That’s right, it’s Switzerland. This is not only commendable, the country also puts this into practice: Switzerland ranks third in the recently published global “ISS-ESG Country Report 2019”, behind Sweden and Finland, and far ahead of all other countries with important financial centres.

The Swiss financial centre can only have a sustainable impact at the global level if Switzerland is recognised as a role model worth emulating, even though its financial centre is disproportionately large considering the country’s size.

Serving as a role model through expertise and framework conditions

The financial sector becomes a role model when it sets an example through high-quality products and services and thus distinguishes itself from the competition. This requires expertise through attractiveness as a business location, a broad educational offering and critical mass. Sustainability ecosystems have emerged in both Geneva and Zurich. In addition to the asset management business itself, these include other specific activities in connection with sustainable finance and the related labour market.

But to be recognised as a role model, you need to actually be noticed first. Over the last few years, a number of initiatives in the area of sustainable finance have led to the emergence of some truly significant initiatives. Switzerland is actively involved in all of these and is thus contributing to the acceleration and consolidation of sustainable finance. Some of the most important initiatives include:

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Financial Centres for Sustainability (FC4S):

The FC4S network was founded in September 2017 in Casablanca. It was established as a partnership between financial centres and the United Nations Environment Programme. The aim of the network is to exchange experiences and take joint action on shared priorities in order to accelerate the expansion of sustainable finance. The long-term vision of the FC4S network is the rapid global growth of sustainable finance, supported by enhanced international interconnectedness and a framework for joint action. Swiss Sustainable Finance and Sustainable Finance Geneva are active members of the network and the FC4S Secretariat is based in Geneva.

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Network for Greening the Financial System (NGFS):

The network of central banks and supervisory authorities is a collaborative structure aimed at greening the financial system and strengthening the financial sector’s efforts to achieve the objectives of the Paris Agreement. This includes, for example, mobilising capital for green and low-carbon investments. As a voluntary, consensus-based forum, the NGFS has issued six recommendations for central banks, supervisory authorities, policy makers and financial institutions with a view to strengthening their role in the greening of the financial system and the management of environmental and climate risks.

The SNB and FINMA joined the NGFS in April 2019. As members, they are required to make an active contribution.

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The UN Principles for Responsible Investment (UN PRI):

The UN PRI is an investor initiative founded in 2006 in partnership with the financial initiative of the UN Environment Programme UNEP and the UN Global Compact. The initiative, which is supported by the United Nations, is an international investor network that has established and intends to implement six principles for responsible investments. The aim is to understand the implications of sustainability for investors and to support the signatories in incorporating these factors into their investment decision-making processes. More than 130 Swiss signatories have joined the UN PRI.

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Principles for Responsible Banking (UN PRB):

The UN PRB provide the framework for a sustainable banking system and help the sector to demonstrate how it makes a positive contribution to society. They are accelerating the banking industry’s contribution to achieving society’s goals as expressed in the Sustainable Development Goals and the Paris Agreement.

The UN PRB was launched by 130 banks from 49 countries at the annual United Nations General Assembly in September 2019. In addition to the two big banks, three major Swiss wealth managers were also signatories. Other banks are sure to follow suit.

For Switzerland to be able to truly promote sustainability effectively, it must serve as a role model that can be imitated. In particular, restrictive measures that are not in line with international developments do not serve as an example. Instead, they act as a deterrent or even lead to a shift of business to countries with lower sustainability standards.

The authorities and the financial sector are already actively participating in international developments and are making commitments that go far beyond what is required in Switzerland today.

To strengthen the Swiss financial centre’s position as a leading international hub for sustainable finance, however, the framework conditions must also be improved. The current restrictions on sustainable investing should be eliminated in order to make it possible for such products to be selected at all. In addition, growth in the sustainable products segment will increase once they are made exempt from fiscal hurdles such as withholding tax and stamp duty. And last but not least: we must be able to export our “Swiss sustainable finance” in order for it to be recognised as such abroad. And for that we need access to these markets. From an overall perspective, it is clear that the best prerequisites are in place to ensure that the Swiss financial centre still ranks among the leaders in 2050 – but we must make the right adjustments today!

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The SBA reserves the right not to publish comments. This applies in particular to comments that are offensive, irrelevant or do not address the topic. It also applies to comments written in dialect or a foreign language (except for French, English and Italian). Comments posted under pseudonyms or obviously false will also not be published. Comments are moderated.