Greater transparence on investments’ climate footprint as banks adopt new Swiss scorecard

Switzerland and its financial center are fully committed to meet the ambitious targets set out in the Paris Agreement on climate change: to reduce greenhouse gas emissions to net zero by 2050. To facilitate the life of investors, the federal government has developed a user-friendly comparative tool – the Swiss Climate Scores – in association with financial services industry associations, such as the Swiss Bankers Association and the Asset Management Association Switzerland (AMAS). Non-governmental organizations and academia have also been involved.

Six key indicators assessed in the Swiss Climate Scores

The climate scores provide meaningful and comparative scorecard assessing the alignment of a financial investment to the Paris Agreement’s goals. It composed of six key indicators that match existing and internationally established criteria, namely the investment’s:

• intensity of greenhouse gas emissions versus the global benchmark index,
• exposure to fossil fuels activities versus the global benchmark index,
• global warming alignment – the level of impact in terms of temperature change,
• membership in credible climate engagement initiatives such as the Carbon Disclosure Project,
• proportion of companies with verified commitments to net zero initiatives versus the benchmark index,
• management to net zero

An Excel template ensures a standardized calculation of the six key indicators listed above and that the results are presented in a uniform manner. It is based on expert consensus and available to the public. “The template provides users with the definitions and calculations needed to better understand and report on the recommended indicators,” explains Aurélia Fäh, senior sustainability expert at AMAS, an association which represents 180 asset managers based in Switzerland. “We welcome and support the work of the Swiss government related to the Swiss Climate Scores,” she adds.

Swiss approach provides forward-looking transparency

The Swiss Climate Scores create a forward-looking transparency about the future achievement of climate goals. They avoid merely distinguishing between “sustainable” and “non-sustainable,” and aim at capturing the extent to which companies are positioned for the necessary transition to net-zero. The measurement is made by comparing the production and transition plans of the companies included in the portfolios with a trend that is necessary to limit maximum warming to 1.5° Celsius.

The European Union (EU) tackles the issue differently. The EU’s sustainable finance rating system, known as the EU taxonomy, applies to financial institutions, large companies, and EU member states. It is a classification system that provides a snapshot of the current sustainability of economic activities. Contrarily to the Swiss approach, it does not provide any forward-looking data.

”The Swiss Climate Scores offer a pragmatic, simple and focused way to illustrate the extent to which a product is aligned with carbon neutral objectives. It provides transparency and comparability across financial products and offers a pragmatic alternative to the detailed and sophisticated EU regulatory framework,” says Fäh.

Financial investments influence the achievement of climate goals

Globalance Bank was the first financial institution to publish its climate scores in March 2023. The bank’s founder and CEO Reto Ringger explains that he supports the Swiss Climate Scores initiative as “financial markets and its players bear a share of the responsibility to be part of the solution – because financial investments have a major influence on the achievement of climate goals. With the Swiss Climate Scores, there is now a catalogue of criteria based on the latest international knowledge that private and institutional investors can use to assess how climate-friendly financial products actually are.” The Zurich-based bank published its Swiss Climate Scores for all its assets under management, including its investment funds. An example can be found here.

Additional financial institutions set to publish their Swiss Climate Scores soon

The use of the climate scores is voluntary, but the Swiss government has high expectations and forecasts a rapid take-up. “We expect that a number of additional financial institutions will release their climate scores during the second and third quarter of this year,” says Christoph Baumann, Head of Sustainable Finance at the State Secretariat for International Finance (SIF). AMAS echoes this view. “Many of our members currently focus on the implementation of the Swiss Climate Scores, and we should be able to take stock of the adoption of the scores in the coming months through an industry survey,” says Fäh at AMAS.