Will sustainable finance go through sectoral agreements?
No regulation similar to that of the European Union seems to be envisaged for the time being in Switzerland, which has chosen to let financial market players define their own rules.
Opinion
In August 2019, the Commission for the Environment, Spatial Planning and Energy of the Council of State asked the Federal Council a concrete question: how can Switzerland make financial flows compatible with climate objectives? of the Paris Agreement?
This Commission relayed the terrible finding of the first PACTA test noting the (non) compatibility of financial flows with the commitments made by Switzerland under the Paris Agreement to limit global warming to 1.5 degrees. Indeed, the trajectory taken by the Swiss financial center then projected a warming between 4 and 6 degrees.
In June 2020, the Federal Council ignored this terrible reality and hammered home in its report on sustainable finance that the Swiss financial center would become one of the world’s leading centers for sustainable financial services.
Last November, a report on financial market climate accounting was published by the Federal Council which attempts to answer the question posed in August 2019.
No European copy-paste
As of 2021, the European Union has put in place a body of binding rules in the field of sustainable finance. In particular, it adopted Regulation (EU) 2019/2088 on the publication of information on sustainability in the financial services sector, from which stems an obligation of transparency for its players. A second regulation on taxonomy provides for a classification system for sustainable financial products, allowing the information published to be comparable from one institution to another.
Although the Federal Council notes the importance of transparency and publicity in the fight against greenwashing, no similar regulation in Switzerland is currently envisaged.
We can all the same salute the efforts of FINMA, which recently highlighted its desire to protect investors with regard to the alleged sustainability of certain financial products and services by publishing a few guidelines on the subject of existing greenwashing.
But how can we hope to prevent, monitor and sanction eco-laundering in the absence of a legal framework allowing everyone to know the rules of the game?
Sector agreements
The solution recommended by the Federal Council consists of concluding sectoral agreements with market players. He considers that this mode of proceeding will make it possible to find solutions by mutual agreement with the economic circles.
While some financial players appear to be in demand for such agreements and inclined to genuinely take into account the impact of finance on the habitability of our planet, others remain stuck in an approach from another time, that of single consideration of climate-related financial risks (i.e. the risks that climate change poses to investments but not the other way around).
The gap between the advertising made by certain financial institutions and the reality emerged in particular from the 2020 PACTA Test: a good number of financial institutions that declared that they no longer invested in coal did not actually keep their promises. Similarly, recent studies by Greenpeace as well as the RTS and TTC show that the sustainable funds offered to clients turn out to be much less green than advertised.
The Federal Council recommends dialogue with the four branch associations (ASB, ASA, ASIP and AMAS). But what can we really expect from these agreements? More transparency, compulsory participation in the next PATCA tests and the detailed publication of the results? It would certainly be a starting point but largely insufficient.
In the economic field, Swiss policy is based on the primacy of solutions relating to the market economy, public action is subsidiary. But leaving the management of the impact of the Swiss financial center on our future to its actors reflects a lack of courage and awareness of the urgency on the part of our government.
Minimum content
These sectoral agreements should at least clarify that an approach based on the financial risks resulting from climate change is not synonymous with sustainable finance.
The climate impacts of institutions’ business activities and therefore of their financial products should be disclosed explicitly and comprehensively. This transparency should allow investors to compare this data between financial institutions.
The dice are now cast.
Let’s hope that our financial sector will be able to live up to the responsibilities incumbent on it and will surprise by the scale and speed of its commitments.
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