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Executive Summary

Some abbreviations are used in this chapter. You can find explanations of all abbreviations in the glossary.

Current situation

The Paris Agreement requires countries to harmonize their financial flows with the objectives of the Paris Agreement. (Article 2.1.c of the Paris Agreement (United Nations 2016)).

The impact of the financial sector on the climate crisis cannot be deduced as directly as, for example, in the transport sector, where a car running on petrol directly emits CO2. Rather, the problem here is that all branches of the economy and sectors that emit CO2 directly receive their money through financial institutions. Banks, pension funds, insurance companies etc. are so-called "financial intermediaries", i.e. they mediate between the supply and demand for capital. Through them, the money of customers who want to invest their money flows to all kinds of companies, which can be climate-friendly, climate-damaging or climate-neutral. For example, the company includes companies that produce crude oil or carry out fracking abroad. These financial intermediaries help these companies to raise more capital, which in turn helps them to remain profitable despite the competition from renewable energies. This example shows that the market is not simply neutral. Risks are wrongly assessed by the financial market because many financial institutions have not built up expertise internally about the climate and financial risks of fossil fuels and the opportunities offered by alternative investments. So as a financial institution, you feel safer and more comfortable investing in the time-tested fossil infrastructures instead of promoting a change in thinking. Many financial institutions have long denied their responsibility to the climate and society. Financial intermediaries are not just passive vessels through which money flows, they can actively control where the money goes and therefore have a great responsibility and obligation. Unfortunately, very few financial institutions do this.

So, if the Paris Agreement states that financial flows must be brought into harmony with the 1.5 °C objective, this means that money must no longer be allowed to flow into fossil infrastructure. Our economy and society must make the transition to a net zero economy and society. Even if all the technological achievements are in place, this will not work as long as financial intermediaries continue to direct financial flows towards the promotion of fossil energy or other emitting projects.

The Bank of International Settlements (BIS) made clear in a new report in early 2020 that the climate crisis is a major financial, material risk and that all financial market regulators and central banks must immediately start to address climate change (Bolton et al. 2020).

In order to meet the objectives of the Paris Agreement, various international initiatives have been formed in recent years. The Addis Ababa Action Agenda (United Nations 2015) creates a global framework to make financing flows compatible with the Sustainable Development Goals (SDGs). The UNEP FI (United Nations Environment Programme Finance Initiative) initiatives of the UN (UNEP Finance Initiative n.d.) create a platform for commitments of financial institutions, both banks and insurance companies. The NGFS (Network for Greening the Financial System) (NGFS n.d.) creates a platform for central banks and regulators to address the issue.

Many other initiatives create the basis for SDG (sustainable development goals) and ESG (ecological, social and governance) reporting standards and transparency, but it is often difficult to assess whether these commitments are merely lip service. So far, there has been too little sign of a noticeable change in the Swiss financial sector.

The FOEN concludes in a report in 2015 that Swiss financial flows alone support a climate warming scenario of 4-6 °C (Oehri et al. 2015; Thomä et al. 2017). The FOEN emphasizes here above all the financial risks and losses for the Swiss financial sector that will follow if the world complies with the goals of the Paris Agreement. In this context, economists speak of the "carbon bubble" (Clark 2015). The financial sector runs the risk of overestimating the yield from fossil fuels. If this bubble bursts, this could lead to considerable losses for the Swiss financial sector.

Some countries, such as the United Kingdom and more recently the EU, are taking a leading role in implementing these demands. For example, years ago, the former governor of the Bank of England, Mark Carney, obliged British banks to carry out stress tests on climate risks (Bank of England 2020). In Switzerland there has been a lack of comparable forward thinking so far. The EU is also tackling the issue proactively. It is committed to a far-reaching and ambitious reform of the financial system. In 2018, the EU Commission published the action plan for financing sustainable growth (European Union n.d.). The new EU laws will also have a major impact on Switzerland. There are no measures or projects on the Swiss side comparable to those that have been pushed forward for years in other European countries, but so far the regulators and the financial sector have avoided the issue. In terms of the size and importance of its financial sector, Switzerland brings up the rear in Europe.

It would be particularly important for Switzerland to address this issue. With its financial sector, Switzerland has a large climate lever which, if consistently implemented, can bring great benefits for the global climate and also for the Swiss economy. On the one hand, financial markets should be protected against climate risks, such as stranded assets or losses due to extreme weather events. On the other hand, capital needs to be diverted away from fossil fuels towards renewable, efficient technologies to enable the transition of our economy and society to a net zero economy and society.

The Swiss financial sector, in particular Zurich and Geneva, is one of the most important in the world and Switzerland is one of the most important global asset managers (GFCI 2018). Our financial sector therefore has particularly strong leverage in international climate policy and the global economy, which is an opportunity for Switzerland to reduce its foreign emissions and a commitment to the world, because if we do not do so, the whole world will never be able to achieve the targets of the Paris Agreement. It is in keeping with the polluter-pays principle to demand action from the Swiss financial sector and regulators now.

But the Swiss financial institutions also have a great deal of leverage here in Switzerland. A few large banks have many capital investments abroad, but smaller banks, such as cantonal banks, mainly grant loans in Switzerland. Mortgage lending accounts for the largest part of their business. The building sector has the second highest share of domestic CO2 emissions after transport, as many buildings are not energy efficient or have oil heating systems. In other European countries, the transparent information of market participants through mandatory energy efficiency labels for buildings has been enforced to address this problem. In Switzerland, however, the corresponding building energy certificate issued by the cantons (GEAK/CECB/CECE) has so far mostly been voluntary. In this respect, banks could intensify their activities in the field of building refurbishment (Cousse, Kubli, and Wüstenhagen 2020). Companies operating in Switzerland, for example industrial companies or those involved in transport, are also financed by loans from banks. Here too, banks are not only passive vessels through which money flows, they can also actively make claims. In addition, on the financing side in general, more commitment can also be made by domestic banks. In summary, the financial sector has the power to drive forward the transition of our entire economy, both here in Switzerland and globally. And with great power comes great responsibility, as is well known.


Today, the Swiss financial sector is responsible for a heating scenario of 4-6 °C, which not only falls far short of the goals of the Paris Agreement, but will also have devastating consequences for humanity, biodiversity, the environment and everything we know, and last but not least threatens to destabilize the financial market itself. But it could also be quite different. This is how we envision the Swiss financial sector of the future:

The Swiss financial sector will be climate-neutral in terms of direct and indirect investments by 2030.

There is transparency about financial flows, not only in the climate area. Both as an investor and as a customer, you have the right to know exactly where the money is flowing to and what effect it has.

Divestment and investment are two sides of the same coin: By 2030, financial players will have found ways to replace the previous income from financing fossil fuels with value creation in the area of financing low-emission technologies and projects.
The Swiss financial sector has built up a great reputation worldwide in the field of sustainable investment and is considered a leader in this field. It is a pioneer in the field of digital technologies for financing climate-friendly products (Clean Fintech). Switzerland of the future is also a center for international green funds.
Today there are a handful of systemically important financial institutions. These are "systemically relevant" because they are so large that if one of them makes bad decisions and thus falls into a crisis, they can pull the entire Swiss economy into a crisis. This is not only unfair, it also harms the stability of our economy. Furthermore, a few large financial institutions have particularly strong power in the market and can distort it in their favor. In such cases, one speaks of oligopolists.

The financial sector of the future is more diverse and is not dominated by a few oligopolists. The Swiss financial sector is therefore no longer a cluster risk for our economy and contributes to its stability.

In the future, the tasks of the Swiss National Bank will focus more strongly than today on pursuing a comprehensive understanding of the long-term stability of the financial markets. Acting in the best interests of the Swiss economy also means consistently pursuing climate neutrality and sustainability goals.
As part of the solution, the entire financial sector will contribute to making mankind better prepared for future crises! In particular, it proactively supports the early identification of negative external effects in the area of the climate crisis and beyond, and the development of solutions.


Different actors play different roles in regulating the financial sector. We subdivide the chapter into regulators and financial institutions to better distinguish what regulators can do and what private actors would have to do.

The most important instruments for this are the following:

Divestment: The withdrawal of capital from emission-intensive parts of the economy, for example oil companies.

Investment: Capital is directed specifically into climate-friendly sectors or companies that are necessary for the transition of the entire economy to a CO2-neutral economy.
Engagement: If CO2-intensive companies are not able to drive change internally, they will not be able to survive on the market in the long term. It is preferable that the management in these areas actively approaches the change on its own initiative. However, management is often reluctant to face the facts and develop new strategies. Shareholders can actively exercise their voting rights and influence to drive internal change in such parts of the economy.

Transparency: A major problem is the lack of transparency about the climate-damaging effects of financial flows or information about financial flows in general. Customers, both private and institutional, are not well informed and cannot make conscious decisions, even if they want to invest their money climate consciously. Such information and transparency provide the basis for informed customers to express their demand for sustainable financial products. This information also provides the basis for science, which can only make meaningful analyses in this way.

The policy proposals in this chapter revolve largely around these instruments and various approaches to their use. We focus primarily on measures that can be implemented in the current system rather than on fundamental criticism of the system itself. Time is running out, and it is becoming more challenging every year, week by week, day by day, to achieve the goals of the Paris Agreement. However, the solutions are ready, and this chapter should make a significant contribution to bringing these implementable solutions to the general public, politics and business. More fundamental criticism of the system is discussed in more detail in the chapter Economic and Political Structures.

Introduction of Regulators

The Swiss financial sector is mainly regulated by the Swiss Financial Market Supervisory Authority (FINMA). The Federal Constitution as well as various laws and ordinances of the Federal Council provide the legal basis on which FINMA operates. Its competences are very broad and are implemented in the FINMA Act (Die Bundesversammlung der Schweizerischen Eidgenossenschaft 2007).

FINMA's objective is to protect creditors, investors and insured persons and to maintain the functionality and systemic stability of the financial markets. In practice, this means in concrete terms: combating money laundering, monitoring companies under their control, providing an overview in the event of bankruptcy proceedings, etc. FINMA is empowered to issue its own ordinances of a legislative nature. However, the financial market is largely self-regulating. The Swiss Bankers Association (SwissBanking) adopts rules of conduct and other guidelines which can be recognized by FINMA as minimum standards.
Finally, it is the Swiss Federal Assembly that creates the legal framework for FINMA's activities. It is also entitled to lay down drastic regulations in the law, even if it does not usually do so.

The Swiss National Bank is the second regulatory body of the Swiss financial sector. The SNB itself is also a financial intermediary, in fact the largest in Switzerland. The SNB's objective is to ensure the stability of the economy and price stability. In practice, the SNB regulates the financial sector primarily through its interest rate policy, by reacting to fluctuating economic conditions (recession or boom). The legal basis for the SNB is also explained in our legislation and in the constitution. The SNB is an independent national bank, which means that the legislator, i.e. the parliament, can very rarely intervene in its investment or interest rate policy. Nevertheless, the SNB is free to intervene in the financial market in other regulatory ways, as the Bank of England, another independent national bank, does.

The State/FINMA/Swiss Banking

Policy 8.1: Legislative Reduction Targets / Adaptation of the CO2 Law

At the fourth national meeting, the climate strike adopted the following demands, among others, by consensus (Klimastreik Schweiz 2019):

"We call for a reduction of the direct and indirect greenhouse gas emissions of the Swiss financial sector to a net 0 by 2030, in particular a halt to financing, investment and insurance services for fossil fuels.

  1. From now on no new investments, credits and insurance services for projects and companies active in fossil fuel extraction! This includes coal companies, the tar sand industry, natural gas and oil.
  2. The financial institutions should present clear plans by the end of 2020 with concrete goals and measures to bring their financial flows (loans, investments and insurance services) to a net zero by 2030.”

These points could be anchored in the CO2 law as well as in the financial laws. The new CO2 law, which has now been passed but has not yet come into force, does not envisage any intervention in the financial sector today. Individual proposals that were part of this directive were rejected. This appears to be disproportionate.


Concrete implementations of these demands by legislators and regulators could look like this:

  • The CO2 law already sets reduction targets for other sectors. The majority of the emissions caused by direct and indirect financing of the financial sector are generated abroad, but here too Switzerland should anchor reduction targets for financial institutions for their scope 1-3 emissions in the CO2 law. More concretely, a complete reduction of all direct and indirect greenhouse gas emissions through financing, investments and insurance services, particularly in fossil fuels, so that the financial sector reaches a net zero by 2030, should be enshrined in law.
  • All new investments, direct or indirect, in fossil energies must be prohibited. It is up to the regulatory authorities to decide how such a ban will be implemented and enforced and how much time will be allowed for this implementation.
  • Target agreements with individual financial institutions that are responsible for a particularly large number of emissions would also be desirable. These financial institutions would then have to prepare regular reports.
  • These targets should also be included in the Swiss NDCs (Nationally Determined Contributions) and communicated to the UNFCCC (United Nations Framework Convention on Climate Change).
  • All financial institutions should be obliged to develop net zero plans: All financial institutions should be obliged to develop a company-wide climate strategy that leads to complete decarbonization by 2030. This should include both the exercise of voting rights of shareholders and engagement strategies.


No public funds need to be used to implement such regulations, or the wages and maintenance of the regulators' offices would have to be financed.


Such legislation is a clear and unequivocal signal to the financial world. The impact of this measure is above all the clear commitment to the decarbonization targets and the initiation of the necessary steps. Necessary steps in this case are climate compatibility tests, climate risk stress tests and the development of implementation plans, which of course differ for individual financial institutions. For any financial institution, this transition is such a major undertaking, which is associated with many uncertainties, that it does not even start. The impact of this policy would be to create a uniform and binding framework for all market players, thus overcoming the hesitation that has existed to date.

The federal government is already providing financial institutions with expertise and know-how. For example, the FOEN has developed a climate compatibility test, PACTA. These offers of the test are open today, but not mandatory for financial institutions; such legislation would lead to the federal government's expertise being used.

Social Compatibility

These laws would have an impact above all at the macro level. For example, it could be questionable what a sudden stop of new investments in fossil fuels could mean for workers in producing countries. This could be alleviated by targeted retraining programs. Investments in renewable energies and energy efficiency have a higher employment impact than the capital-intensive mining of coal, oil and gas. In addition, even independently of climate protection, these jobs are endangered by the strong fluctuations in oil prices and the financial market risks triggered by the carbon bubble.

Questions and Uncertainties

In realpolitik, it takes a long time for such laws to come into being and/or be implemented. It is far more desirable for financial institutions to commit themselves to these goals on their own initiative now and to develop action plans to achieve net zero emissions by 2030. The confederation and regulators must help them to do so, for example in the form of climate compatibility tests (see Policy 2) or through expert knowledge.
An immediate ban on new investments in fossil fuels, as explicitly called for by the climate strike, could come too suddenly and pose a particular challenge for large financial institutions. With reference to the literature on the carbon bubble (Clark 2015), one could conclude that this would cause panic on the stock market. "Immediately" should therefore reasonably and consistently be understood as "as quickly as possible". It is desirable that regulators work with the financial sector to work out a transition that is compatible for the stock market and the economy. The earlier this challenge is actively addressed, the better the chances are of avoiding major distortions that would cause the carbon bubble to burst.

Policy 8.2: Obliging Financial Institutions to Perform Stress Tests


The first necessary step for all financial institutions is to analyze the carbon footprint of their own financial flows. Financial institutions should undergo an annual climate compatibility test and disclose this information. Since 2017, the FOEN and the SIF (State Secretariat for International Finance) have been conducting voluntary pilot tests to analyze the climate compatibility of financial portfolios of pension funds and insurance companies (FOEN 2020c). This test should be made mandatory by law. The test should be mandatory for all financial institutions (banks, insurance companies, pension funds) and cover the entire investment universe, including loans and insurance.

The results of this test will only provide specific information about which scenario of temperature rise is supported by the respective portfolio (for example 2 °C/ 4-6 °C, etc.). However, climate risks and the associated physical and financial transition risks are also a threat to the stability of the economy (see information on Carbon Bubble in the section Current Situation).

In the UK, the Bank of England conducts stress tests on climate risks in the portfolios of financial institutions (Bank of England 2019). The FINMA and/or SNB should do the same as the Bank of England. All financial institutions should be required to perform such a stress test annually.

The Swiss Federal Statistical Office (FSO) and FINMA/SNB should collect these data on financial market stability and inform the public transparently about the results every year.


The measure could be implemented by the existing institutions (FINMA, SNB, FOEN). At best, the relevant departments would have to be expanded to include additional specialists.


Without a thorough analysis of the current situation, no targeted measures can be taken. The climate stress tests provide decision-makers within and outside the financial institutions with the necessary information basis for reducing the identified climate risks.

Social Compatibility

The measure should contribute significantly to the well-being of the population, since a sustainable and stable financial sector does not represent a cluster risk for the entire economy.

Questions and Uncertainties

It remains to be seen whether it makes more sense to delegate this task to the SNB or FINMA. However, this should not affect the impact of the policy, what counts is that such annual stress tests are institutionalized and conducted annually.

Policy 8.3: Green Investment Facility

In the Cross Sectoral Policies chapter the Climate Bank is described in more detail, the following policy is similar.


The new CO2 law provides for a climate fund. Investments are urgently needed for the necessary building renovations, the turnaround in transport and not least the energy turnaround. Especially for the energy turnaround, public funds are needed so that new solutions, which already exist, can quickly enough establish themselves on the market. The climate fund is therefore a necessary step, but it is not sufficient. A Green Investment Facility could complement the existing funds by investing in climate-friendly energy projects (e.g. power generation from renewable energies, heating networks). The necessary funds and appropriate "Climate Agencies" which should receive them are explained in the Cross Sectoral Chapter as well as in the Transport, Building and Energy Chapters. The Green Investment Facility is intended to provide debt capital to companies and projects, for example in the form of Green Bonds. Thus, the market should become more attractive for private investors through public investments. Due to the still missing truth of costs caused by indirect subsidies for fossil energies and further hurdles for renewable energy sources, private investors estimate the risks as too unclear or high for corresponding projects. The Green Investment Facility can specifically create security for private investors. Furthermore, public funds are used responsibly by making them available as debt capital. During the Corona crisis, the Swiss government has proven that it is capable of a public-private partnership to effectively mobilize large amounts of private funds.

The climate fund proposed by the ESPEC-S (Environment, Spatial Planning and Energy Committees) could, as also proposed by the Commission, replace existing funding instruments such as the technology fund and the buildings program. However, the UREK-S proposal would only be effective in the medium to long term and would hardly help to achieve net zero by 2030. We therefore propose that the fund be filled up promptly, thereby triggering a green stimulus to counter the current recession. Economic measures are urgently needed in the current economic situation, and the federal government can thus provide targeted support for sustainable industries instead of pre-programming the next crisis with indiscriminate rescue measures for emission-intensive industries.

To ensure that the accelerated investments can be absorbed by the market, complementary measures should be taken (see Policy 8.11).
Within the framework of international treaties, Switzerland has declared itself willing to provide international funds for mitigation and adaptation efforts in countries of the Global South. This is currently done through the international Green Climate Fund. A Swiss Green Investment Facility could also mobilize private capital for mitigation and adaptation efforts in the international context.


There are various financing options available, which should be combined for maximum effectiveness. A transfer payment from the SNB is proposed. In the current situation, the Green Investment Facility is to be used as an economic tool, so the SNB is an appropriate source of financing. The current financing can be supplemented by earmarking part of the CO2 tax or an air ticket tax. In any case, care must be taken to ensure that sufficient funds are available at the beginning of the decade and that they cannot be invested only shortly before 2030.


The green stimulus that has been triggered can pull the economy out of recession again. As stated in other chapters, investments in energy system transformation, transport transformation and building refurbishment are now necessary if a consistent reduction path is to be followed, leading to net zero GHG emissions in 2030. In the medium to long term, private capital will also increasingly flow into technologies and infrastructure necessary for a climate-neutral society and economy. By reinvesting the proceeds of these initial investments, the effectiveness of the Green Investment Facility can be further increased over the years.

Social Compatibility

The Green Investment Facility (together with the Climate Bank) would primarily trigger accelerated climate protection investments domestically and thus secure or create jobs in the skilled trades and construction industry. In contrast, these investments could lead to a decline in employment in the oil and gas sector, which should, however, be less significant in net terms due to the higher employment intensity of the former, and which are also less likely to be located domestically. When investing in rental buildings, care must be taken to ensure that costs and benefits are shared fairly between landlords and tenants (see chapter on buildings). Due to their greater potential of land for renewable energy projects, rural areas could benefit disproportionately from Green Investment Facility investments, which would benefit national cohesion and social cohesion. At a later stage, the expertise gained in the context of Swiss development cooperation could lead to better services and support for these countries.

Questions and Uncertainties

The governance of the Green Investment Facility should ensure a balanced mix of technical expertise, democratic control and social transparency. Cooperation within the framework of a public-private partnership can increase acceptance of the new institution, but care must be taken to ensure a fair distribution of profits and losses between public and private shareholders. When designing the investment portfolio, it must be ensured that investments are mainly made in projects that will achieve emission-reducing effects in the next 10 years.

Policy 8.4: Adopt EU Green Taxonomy

In order to be able to make sustainable investments, the financial sector needs a database. The climate-damaging and also climate-positive effects of companies are not always directly comprehensible. Emissions occur everywhere in the value chain of a company, which is why they are referred to as Scope 1, 2 or 3 emissions.
Financial institutions usually simply evaluate companies via their periodic financial statements. These do not contain any information about the climate compatibility of a company's overall economic activities. Financial institutions usually do not have the expertise to evaluate the climate impact of their financial flows. Therefore, financial institutions are required to perform climate change assessments (see policy 8.2).
In order to make it possible in the long term for financial institutions to competently take climate risks into account in their decisions without the need for such external tests, a classification or a so-called "Green Taxonomy" is needed.
The EU Taxonomy has developed a "Green Taxonomy", which has exactly this goal (Technical Expert Group on Sustainable Finance 2020). The EU Taxonomy identifies and classifies economic activities of companies in the most CO2 intensive industries according to climate criteria. These activities are examined whether they have a positive impact on the climate and/or a neutral impact on the climate. Economic activities that have a specific negative impact on the climate are not classified separately, so they are called "green" taxonomies, not "brown" taxonomies. Companies can use this taxonomy to issue so-called "green bonds", financial institutions can invest in them.

In the EU, this system will take effect from 2021. As in the EU, companies listed on the Swiss stock exchange and other large companies (e.g. over 500 employees and over CHF 500 mio turnover) should report EU Taxonomy compliant.
Financial institutions themselves, as companies listed on the stock exchange, would of course also have to do this. Such a measure creates more transparency and helps the financial sector to be able to invest specifically in the ecological transition of our economy.


For companies there will be an additional effort in reporting. This will also involve more time and costs. Even if the Swiss financial market does not adopt the EU Taxonomy as proposed in this policy, companies operating in the EU area will have to do so anyway. Costs are lower if you follow the EU regulations. Furthermore, all kinds of companies will have to start making thorough analyses of their environmental footprint anyway, so they should already have this data available.


Investment and Divestment are two sides of the same coin. Such taxonomies provide the basis with which net zero financial flows can be achieved. The impact of this policy would be accordingly immense and absolutely necessary for the change of our economy.
Even if these taxonomies are initially only binding for the European area, they have the potential to become a blueprint for the rest of the world.

Policy 8.5: Carbon Accounting

In order to create transparency for the financial sector and for the general public, existing Swiss accounting standards (e.g. Swiss GAAP FER) should be extended to include the documentation of CO2 emissions, taking into account all scopes (Scopes 1-3). The inclusion of climate risks will thus be institutionalized not only for financial institutions, but for all companies that apply the corresponding accounting standards and are listed on the Swiss Stock Exchange. This extension should also become an admission requirement for the Swiss Stock Exchange. This would make carbon footprint analysis a standard practice and standard valuations would become a fixed part of it. On the one hand, financial institutions will be able to make informed decisions on the financing side, and on the other hand, listed companies will have to deal with their environmental footprint more intensively.


As described above, this policy would have the effect of ensuring that the debate on climate risks is taken into account more intensively and thoroughly within the overall economy. Climate risks, like liquidity risks or the financial statements of a company in general, should be considered holistically. Such a policy would aim to achieve this.
It would also improve transparency for the public and all stakeholders. Today, many companies have corporate responsibility or sustainability reports, but these are often primarily a marketing tool and contain little concrete information and figures, but all the more buzzwords. This does not yet guarantee transparency. In fact, these reports are often only used as greenwashing tools.

Open Questions and Uncertainties

Some companies are both part of the problem and part of the solution. Companies that develop and promote technologies that contribute to the transition of the economy as a whole are still emitting emissions today. However, it should be possible to show such efforts in the context of carbon accounting. Nevertheless, clear information and transparency are important to prevent greenwashing.

Policy 8.6: Defining Fiduciary Duties More Clearly

For all who manage foreign money, the so-called "fiduciary duty" applies. First and foremost, these are pension funds and insurance companies. Basically, this refers to a responsible management of the insured persons' money "to the best of their knowledge and belief". This means, for example:

  • Appropriate inclusion of risks and corresponding diversification of portfolios
  • Duty of information and transparency towards the insured persons

One of the reasons often cited why financial institutions still invest heavily in fossil energy is precisely this portfolio diversification (Kohli 2019).
It is precisely this diversification that prevents many from exiting the fossil energy sector. In practice, diversified investment or supposedly diversified investment is merely a reflection of the entire index. In other words, one tries to invest in everything, including fossil energy. The desired effect is that the portfolios do not suffer massive losses due to possible fluctuations on the stock market.

Unfortunately, the fact that the inclusion of investments in fossil energy to the extent that it is done today is negligent is strongly neglected. Because, as already mentioned, there is the danger of a carbon bubble. Other countries, such as France and the Netherlands, already require their institutional investors to include climate and ESG factors in their investment policy and to disclose their portfolios and the climate risks they entail transparently. Other central banks, such as the Swedish and British central banks are now actively pursuing divestment, partly because they fear risks to financial market stability.

Various legal reports, including an expert report from the FOEN, one from the Climate Alliance, one from the WWF and also an expert report from the UNEP-FI Initiative, come to the conclusion that, on the one hand, the fiduciary duty is too imprecisely defined and, on the other hand, it contradicts the fiduciary duty if climate risks are not included in the diversification of portfolios (Eggen and Stengel 2019; Abegglen 2018). (Sullivan 2015)

The legal articles in the BVG/LPP and other relevant laws should be adapted so that climate risks are explicitly mentioned.
In addition, institutional investors should exercise their voting rights at general meetings of Swiss and foreign companies and vote in the interests of the insured persons.


Pension funds and their trustees need legal clarity in order to be able to exercise their fiduciary duties. Insurance companies need to stay within the law when managing their clients' money, and given how important this money is, it is right and proper that they do so. It is described in detail above why this extension of fiduciary duty is justified. Its explicit rewriting in the legal texts is necessary so that insurance companies can exercise their fiduciary duty and have legal certainty.

In Switzerland, all investments are made in the second pillar. This gives pension funds an extremely large lever to help with the transition of the overall economy.

Social Compatibility

The fiduciary duty in and of itself is a matter of social security. Thus, the clear definition of the fiduciary duty improves social security.

Swiss National Bank

Policy 8.7: Include Sustainability Targets for SNB


The purpose and objectives of the Swiss National Bank are anchored in the Constitution and the law. The stability of the national economy thereby is the main objective of the SNB. The corresponding federal constitutional and legal articles should be supplemented by the concept of sustainability. As already explained in the Current State, the unsustainable and short-term oriented economy of the Swiss financial center is a threat to the stability of the entire economy. Sustainability and the climate risks should be a top priority for the SNB. This view is not shared by the SNB itself, as it sees itself primarily as a neutral and independent authority. It is questionable to what extent this positioning is compatible already with the current articles of the Federal Constitution. In the longer term, even after the climate crisis has been overcome and for timely recognition and pro-active action against future crises, sustainability and long-term thinking will be necessary and should be explicitly mentioned in the relevant articles.

The Bank of England has been doing this for years. The ECB (European Central Bank) and other European central banks are currently also moving in this direction, for example by actively pursuing divestment strategies.

Policy 8.8: SNB Shall Exercise Vote as Shareholder

An important term in the field of sustainable finance is "engagement". Engagement aims to ensure that large investors who own a significant part of a climate-damaging company actively exercise their voting rights and put pressure on the management of the company rather than selling the shares of these companies. Engagement, along with divestment and investment in climate-friendly financial products (e.g. green bonds), is an instrument that can be used by financial institutions for the transition of our economy.

Initiatives like Climate Action 100 pursue this goal (Climate Action 100+ 2020).

The SNB invests its money in a highly diversified manner, i.e. apart from a few human rights-related exclusion criteria, its investment policy tracks the major indices. The SNB is often among the top 40 shareholders of many companies that emit CO2 and thus potentially has a great deal of leverage on the corporate strategy of commodity traders and CO2-intensive companies.

According to its own statements, the SNB pursues an investment policy that is as neutral as possible, which prevents it from actively promoting the consideration of climate aspects by corporate management. It is wary of pursuing a climate policy. However, it is questionable to what extent the active use of voting rights or even divestment measures can be dismissed as climate policy when the stability of the entire economy is at stake, or whether the investment strategy, which the SNB calls "neutral", does not in fact show that the SNB is affected by the same market failure as the rest of the financial sector. The SNB is supposed to drive forward the transition of our economic system to one that is in harmony with the objectives of the Paris Agreement, because only in this way can it guarantee financial stability in the first place.
It is worth mentioning that other independent national banks, such as the Swedish, British and ECB, are doing this today or are committing themselves to it - on the grounds that it is part of financial stability and not a climate policy (Ambrose 2019; Gregory 2019).

Certain sectors, such as commodity trading or the extraction of fossil fuels, can no longer exist in a net zero world. If such companies are not able to drive change even internally, they will go bankrupt. It is preferable that the management in these areas take an active approach to change on their own initiative.

Social Compatibility

Many people are financially dependent on climate-damaging economic activities. In Switzerland this is the case in the raw materials trade, in countries where fossil fuels are extracted this is much more the case, because in such countries the whole economy is often dependent on this sector. Commitment is the socially acceptable way to reach the goal. Not all investors are big enough to get involved, therefore divestment is more recommendable in many cases. For institutional investors such as the SNB, this approach should be actively pursued.

Questions and Uncertainties

As mentioned above, engagement is a possible instrument besides divestment and investment. Other central banks pursue a divestment strategy, and we have decided to focus on engagement, also influenced by the fact that the SNB has in the past been strongly opposed to divestment. In practice, it is unclear how effective engagement actually is. There are significant examples where this strategy does not seem to pay off (Mufson 2017). It should also be mentioned that the SNB has a relatively small team of staff and experts. It is questionable whether they have the capacity to get involved. Of course, they are still free to work with experts in the field, such as Ethos (ethos n.d.) or SRP (SVVK-ASIR 2017), to name a few examples. But they are certainly able to pursue divestment strategies.

Financial Institutions


The financial institutions themselves can play their own part in proactively implementing the regulatory measures required above internally with their own policies, without necessarily waiting for the regulator. The following sub-chapter contains suggestions for appropriate policies.

At this point, reference should be made to the Climate Strike Working Group Banks, which has concrete demands on the financial institutions themselves and is in dialogue with them:

Policy 8.9: Climate Reporting for Financial Institutions


In order to comply with the information obligations of financial service providers towards their private customers, financial institutions should inform their customers about the CO2 footprint of the money invested by the customer. This could take the form of an annual report, for example. In this way, customers would be sensitized to the issue and receive information about the climate risks to which they are also entitled.


Many people are not aware of the issue. It is often very difficult to understand what their own bank account or insurance premiums have to do with the climate. The whole business is handed over to the financial service provider of their trust without really knowing what happens to it.
When customers are so ill-informed, they cannot even express their demand for climate-friendly financial products.


This would mean additional work for financial institutions, but in the future, financial institutions should anyway record and analyze their own ecological footprints much better and have this data available to them accordingly. In addition, increased regulation by the EU will certainly mean that this effort will have to be made anyway, so the additional effort should be kept within limits.

Policy 8.10: Education and Training for Employees of Pension Funds, Banks and Insurance Companies


The classic training of employees in the financial sector (e.g. Certified Financial Analyst, CFA) traditionally does not include a comprehensive examination of climate risks. Recently, the CFA training has been expanded accordingly (CFA Institute 2020), but still tens of thousands of employees of Swiss banks, insurance companies and pension funds are not sufficiently prepared for the central challenges of the future.
In the future, all consultants and employees are to be made aware of the issue, not only with regard to the investment side, but also in the credit business. Domestically active banks are mostly involved in the mortgage business. Here, too, advisors should be able to provide their customers with professional advice on topics such as building renovation, and the corresponding offers and tools that help with such advice should be expanded (eVALO 2020). Particularly in the lending business of domestic banks, training and further education should be expanded to include climate mathematics.

As part of an education and training offensive, companies in the Swiss financial sector should be required to train 10% of their employees in climate risks each year until 2030. Corresponding offers from universities and e-learning providers could be publicly promoted. The exchange of experience within the industry should also be intensified, for example by presenting regional best practices at learning roundtables of associations or companies.


Education and training is an instrument that allows our overall economy and our labor market to remain flexible and to react to market conditions and changes. The climate crisis is a very good example of a striking change that needs to be responded to. It not only prevents unemployment, but also contributes to the competitiveness of the Swiss economy.


Costs for education and training are covered by the rules both by the employee and the employer. It is highly desirable that the federal government supports this offensive with public funds, in view of the above-mentioned positive factors for the Swiss economy.

Policy 8.11: Tax Incentives for Green Pillar 3a

The private retirement provision via the pillar 3a is today tax-privileged, but without making demands on the climate compatibility of the invested funds. If these funds are invested in fossil fuels, this not only has negative ecological consequences, but can also jeopardize the financial security of old-age provision through climate risks. In addition to the standard solution, many investment foundations today also offer portfolios with an equity component (e.g. 25/50/75 % shares). Similarly, green investments should also be made possible and tax-privileged. One simple measure could be to increase the tax-free allowance for Pillar 3a investments in climate-friendly investment products. This measure could also be made revenue-neutral through a bonus-malus system, in which the current tax-free amount of CHF 6826 per year is reduced by 10% for conventional investments in Pillar 3a and increased by 20% for climate-neutral investments, and the tax rates are adjusted accordingly in the following years on the basis of the observed changes in behavior.


The financing is revenue-neutral for the tax authorities due to the bonus-malus system. The providers of conventional Pillar 3a products lose income, but they can compensate for this by offering Green Pillar 3a products.


The retirement capital tied up in Pillar 3a currently amounts to more than CHF 120 bn, with annual contributions of around CHF 10 bn (Schüpbach 2019). Increased investment of these funds in climate-friendly investments can have a significant leverage effect on the other measures of the Climate Action Plan.

Social Compatibility

A representative survey in 2018 showed that young people in particular (46% of those under 30) would be interested in a Green Pillar 3a (Cousse and Wüstenhagen 2018). With the Green Pillar 3a, this target group could already be actively involved in financing climate-friendly investments today instead of jeopardizing their future by investing their pension fund assets in a way that is harmful to the climate.

Open Questions and Uncertainties

The impact on tax revenues should be carefully monitored. If there is a major switch to the Green Pillar 3a (desirable from a climate perspective), the bonus-malus system should be readjusted in good time.
In an initial phase, small investment foundations, for example, could be overburdened with the offer of a Green Pillar 3a; they could be supported with targeted advisory services (see e.g. Policy 1.9 in the chapter Cross Sectoral Policies).
To be highly effective, the introduction of a Green Pillar IIIa would have to be accompanied by communication. This could either be done by the banks or the tax offices could enclose appropriate information material when sending out tax returns. A "Green Default" would also be conceivable, i.e. that funds are automatically invested in the Green Pillar IIIa unless the insured explicitly request otherwise.


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