Coordinated climate regulation is needed

Switzerland ratified the Paris Agreement on 6 October 2017, thereby committing to halve its emissions from 1990 levels by 2030. It also announced that it will reach net-zero greenhouse gas emissions by 2050, meaning that it will not emit more greenhouse gases into the atmosphere than can be absorbed by natural carbon sinks (such as forests) or using carbon capture technologies. These goals form the reference framework for Switzerland’s climate regulation. Of particular relevance to the financial centre is Article 2.1c of the Paris Agreement, which aims to make finance flows consistent with the global reduction targets. 

CIA and CO2 Act in focus 

The new Climate and Innovation Act (CIA) is the overarching legislation for Switzerland’s climate goals and stipulates that Switzerland must achieve net-zero greenhouse gas emissions (climate neutrality) by 2050. It sets out interim and final emissions reduction targets and is intended to guide funding towards more climate-friendly investments. The financial centre will also have a part to play: the Confederation can conclude agreements with banks, insurers and pension funds setting out specific targets and measures. The Federal Act on the Reduction of CO2 Emissions (CO2 Act) is intended to implement the targets laid down by the CIA. For the period from 2025 to 2030, it aims to help Switzerland achieve its goal of net-zero emissions by 2050 while securing its energy supply. 

The Ordinance on Climate Disclosures, for its part, governs reporting on climate issues by companies, including both the impact of the climate on them and the impact of their activities on the climate (termed “double materiality”). It is based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and provides for implementation via, among other things, transition plans that are comparable with the Swiss climate goals. This focuses special attention on the goals and provisions of the CIA and the revised CO2 Act that are derived from the Paris Agreement. As of 2021, banks in FINMA supervisory categories 1 and 2 are additionally required by FINMA Circular 2016/1 “Disclosure – banks” to disclose their climate-related financial risks in accordance with the TCFD recommendations. 

Coordinated regulation for the real economy and the financial sector 

The real economy and the financial sector are interdependent, including when it comes to fighting climate change and achieving climate goals. Banks can play a key role here. According to a joint study by the SBA and Boston Consulting Group (BCG) from 2021 on what Switzerland needs to reach net zero, over 90% of the investment required can be financed via the banks’ traditional offering.  

Financial institutions merely act as intermediaries in this respect, gearing their products and services to sustainability and providing advice and information on the subject. They do not have the final say on how their clients’ money is put to use, they simply act on clients’ decisions. This means that, if a financial institution wants to achieve its climate goals, it has to seek a change in its clients’ attitudes. 

It is therefore vital for all actors in both the real economy and the financial sector to adopt the same climate goals and time frames. In other words, regulation must be coordinated. If it is not, conflicts between different goals will inevitably arise. If the financial sector is subject to different climate regulation, in particular as regards accelerated transition plans for finance flows, there is also a risk that it will be forced to act as a form of “climate police”, especially if it ends up having to ban or severely curtail funding for activities that are in fact completely legal. Banks have neither the desire nor the ability to assume this role.  

Impact of existing regulation not yet clear 

Switzerland’s existing regulation on climate issues is still young and has not had time to show its full effect. The electorate approved the CIA last year, and it enters into force on 1 January 2025, whereas the consultation on its implementing ordinance only took place at the start of this year during the Swiss Parliament’s spring session, when the revised CO2 Act was also finalised. The Ordinance on Climate Disclosures, meanwhile, entered into force in January 2024, with the first disclosures due in 2025. More time is thus needed to gauge where the regulation is having the desired effect and where there is room for improvement.  

The banks have supported the various regulatory projects so far and will continue to live up to their role as financial intermediaries in the fight against climate change. The SBA believes that it is important to give the existing regulation enough time to make an impact. In addition, any future regulatory measures should be aligned with the existing framework, and their requirements should be coordinated across the entire economy.