Switzerland’s top banks and asset managers are continuing to invest heavily in the expansion of coal and oil production, new analysis shows, prompting warnings they are failing in their efforts to overcome the climate crisis.
The results of the latest climate compatibility test published by the Federal Office for the Environment (FOEN) show that some 80 per cent of the 179 financial institutions surveyed are still invested in coal mining companies.
Why it’s important? The test, which is done on a voluntary basis, aims to assess how aligned the Swiss financial sector is with goals set out in the Paris agreement to limit global warming to well below 2°C.
Although some progress has been made, the report concludes that efforts do not go far enough if Switzerland wants to play a leading role in sustainable finance. Today, the sector invests four times more resources in companies producing electricity from fossil sources such as coal or gas than in those producing from renewable sources
“On average, the Swiss financial centre thus supports further expansion of international production of coal and oil, which runs counter to the climate objective,” FOEP said in a statement, also noting the potential financial risks for investors if, for example, climate policy measures are taken to make them less attractive.
Progress matched with inconsistencies. Since the first test was carried out in 2017, more companies are now taking part, with banks and asset management firms included as well as insurance companies and pension funds, in a sign of greater transparency. Although the names of the participants are not disclosed, institutions representing 80 per cent of the Swiss financial sector are represented in the assessment.
In the survey carried out alongside the test, more than two-thirds of companies said they were following a climate strategy. Half of those firms that took part in the 2017 test claim to also have taken climate actions that have obtained them better results.
Overall, around 72 per cent of climate actions reported in this study were taken after 2017, which suggests an increased awareness and uptake of the topic in the sector after the first test.
However, there are some clear discrepancies. For example, over half of listed equity and over 70 per cent of corporate bonds investors with coal divestment policies still have coal exposures.
Over a third of companies said they consulted end clients or beneficiaries on climate and sustainability objectives. However, only five per cent reported a standardised and systematic approach in this area.
Among the different institutions analysed, pension funds, who are among Switzerland’s biggest landlords, reported they are currently planning to switch from fossil fuels to renewable energy-based heating systems in 30 per cent of their buildings. On the other hand, other players in the financial sector reported such measures only in one to two per cent of their assets.
Environmental groups react. WWF said it was “shocked” by the results. “Switzerland simply cannot afford in two years to see its financial sector still investing so heavily in fossil fuels such as coal or oil. It can and must play a driving role in sustainable finance,” said Stephan Kellenberger, sustainable finance expert at WWF Switzerland.
The NGO is calling on financial and political actors to “define measurable climate strategies” with ways to reduce CO2 and binding intermediate objectives.
FOEP, which carried out the test with the State Secretariat for International Financial Matters SFI, said: “Switzerland must become a world benchmark for sustainable financial services. However, in order to be able to make its contribution to achieving climate objectives, the Swiss financial centre must take even more concrete measures.”
“There remains a need to increase transparency and regularly monitor progress,” it added. The next climate compatibility test is scheduled for 2022.