ESG considerations – an obligation and an opportunity for Swiss banks

Implementation in the market

Earlier this year, we published a blog post highlighting the fact that alongside the returns on their investments, sustainability is becoming increasingly important to clients. Since then, companies in the Swiss financial market have positioned themselves effectively on sustainability topics.

In spring, Switzerland joined the International Platform on Sustainable Finance (IPSF). At the end of June, the Federal Council adopted a report and guidelines on sustainability in the financial sector. At the same time, FINMA confirmed that it was addressing climate risk in the financial industry.

Useful publications on sustainable finance

In early June, the Swiss Bankers Association (SBA), as the voice of the banks in Switzerland, expressed its views on the topic of sustainable finance with the following publications:

  • The SBA position paper on sustainable finance published in September 2019 has been updated. It shows that the Swiss financial centre has the potential to become a leading global hub for sustainable finance. To achieve this, it examines a series of banks’ own initiatives and the ideal political framework conditions.
  • The Guideline for the integration of ESG considerations into the advisory process for private clients is divided into three sections (who, what and how), each with two principles. It does not create additional regulatory requirements, but instead offers assistance with integrating and implementing ESG-related client requirements. The existing regulation already covers the advisory process and also includes (albeit without explicit mention) the recording of clients’ ESG preferences.
  • The brochure Sustainable finance in Switzerland: from pioneer to a premier international hub discusses sustainability in the Swiss banking sector, international developments and the SBA’s basic positions. It explains how the Swiss financial centre can make the best possible contribution to sustainability. Thanks to its strengths, such as experience, financial expertise and a long tradition in this area, sustainable finance is an opportunity for the Swiss financial centre.

Banks have an obligation

The guideline is an example of banks' own initiatives detailed in the position paper and provides guidance on the correct advisory process. The non-binding nature of the guideline makes it clear that banks must collect, understand and take into account client requirements as part of their fiduciary duty. Targeted training of client advisors in ESG considerations – in accordance with principle 2 in the guideline – also plays a supporting role.

The new publications by the SBA make it clear that clients’ ESG preferences must be taken into account in the advisory process and implemented appropriately. However, sustainable finance is much more than just a regulatory obligation – it represents a significant opportunity for the financial centre and offers as-yet-untapped potential.