The Swiss financial market earned good money on untaxed money and has taken a hit with the introduction of the strategy to only accept taxed assets. Now it hopes to regenerate with the commitment to green finance – but is it justified in having such high expectations?
One wonders whether it is a bonus for Swiss banking that the finance minister of the alpine nation once was in charge of an agricultural cooperative – after all, he knows all about nature from personal experience.
Ueli Maurer in any case has been a vocal supporter of more sustainability in finance, suggesting recently that the segment harbors huge opportunities for the industry.
Rapid Rates of Growth
It’s too early for Maurer’s promise to have materialized already, but the call for an investment strategy that respects the environment, society and good governance (ESG) has reached not just the product development in the banking industry, but also lobby organizations, authorities and political parties.
The volumes invested according to ESG-measures are growing rapidly. On the background of global warming and the call for change by a vocal youth, clients have demanded products from their banks that comply with such standards. And at the same time, the industry regulators have woken up to the trend.
Still, it remains an open question whether sustainability will give the business the welcome boost: is it really so, that after the end of the times of untaxed assets and the introduction of a clean-money strategy we now enter an era of green finance?
Swiss ESG Success
The numbers at least look promising. Switzerland for Sustainable Finance (SSF), a business organization, reported a total of 717 billion Swiss francs ($742 billion) invested according to ESG criteria at the end of 2018. The sum accounted for a fifth of all those assets where the industry itself was able to influence the allocation decision – almost the double of the 11 percent average on a global scale.
And this is not the end of it. ESG investments in Switzerland added a full 83 percent in 2018 (see table below). But they still accounted for a fraction only of the 2.27 trillion francs in foreign assets managed in Switzerland (the total at the end of 2019).
A Collective Departure
There is a tangible sense of euphoria that has taken hold of the industry. Private banks that have been around for hundreds of years – such as Lombard Odier – are taking the lead in this new adventure. UBS, the biggest bank in Switzerland, wants to develop investment products according to ESG criteria on an industrial scale. The specialized providers of this asset class are finally enjoying the limelight – examples being Globalance Bank, Robeco SAM, Blue Orchard, Responsibility or Forma Futura Invest.
Lobby groups such as the already mentioned SSF, fund association Sfama and the Swiss Insurance Association are putting their weight behind the push and the Swiss Bankers Association even put together a working group for said purpose. Finma, the regulator, has accepted that climate change is both a risk to as well as an opportunity for the industry is oversees.
Keeping Ahead of Others?
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