19 August 2021
A joint study of the Swiss Bankers Association and Boston Consulting Group highlights for the first time the level of investment required for the Swiss economy to become climate neutral by 2050. The total investments amount to CHF 387.2 bn, or CHF 12.9 bn per year. The Swiss financial centre can cover the lion’s share (around 91 percent) of the investment requirement through bank loans and the capital market.
The financial centre’s contribution
If Switzerland is to achieve its net zero target by 2050, the Swiss economy must adopt more sustainable practices. The Swiss Bankers Association (SBA) is convinced that the Swiss financial centre can make an important contribution towards this transition. Having focused on investment business in 2020 with the publication of a “Guideline for the integration of ESG considerations into the advisory process for private clients”, in 2021 the SBA is concentrating on banks’ financing activities. The key question here is how banks can effectively support the transition of the Swiss economy through financing.
The investment needed to achieve the climate goals equates to around two percent of Switzerland’s gross domestic product (GDP). This will allow measures to be implemented to reduce the greenhouse gas emissions of Switzerland’s ten highest-emitting business sectors in order to meet the net zero target by 2050.
A large portion of the investment needed for the transition can be financed by banks’ traditional offering. In addition to bank loans and mortgages totalling CHF 10.7 bn (83 percent of the annual investment requirement), another CHF 1.0 bn (8 percent) could be financed through the Swiss capital market.
The remaining investments required concern public goods, such as the expansion of public transport, which is traditionally financed by the state (CHF 0.9 bn). The remaining CHF 0.3 bn presents certain challenges because the technologies required are not yet mature enough. Approaches such as blended finance or public-private partnerships may be able to offer solutions that plug the gap.
Vital interplay between the state, economy and financial centre
For the transition – and its financing – to succeed, there has to be optimal interplay between the Swiss state, economy and financial centre.