The Swiss Federal Council has launched a set of “Swiss climate scores” as a new disclosure standard for financial institutions in the country.
The scores, which are intended to be applied by all financial institutions and were developed with an eye towards equity and bond portfolios, contain five mandatory metrics and one optional metric.
Institutions disclosing against the standard must publish scope 1, 2 and relevant scope 3 emissions from portfolio companies versus their benchmark, as well as their fossil fuel exposure, the proportion of portfolio companies with a verified net zero target, their own net zero targets, and details of stewardship and voting activities. They may also choose to report a portfolio temperature score.
The scores are currently voluntary. The Federal Council said it would not be making formal checks to ensure they were being properly applied, but that it would review uptake and the “climate incentive effect” next year, with further development if necessary. It recommended that all financial institutions apply the scores.
Hans-Ruedi Mosberger, head of asset management and sustainability at the Swiss Bankers Association, said the goal was to “create a climate of transparency” for investors that would allow them to have a better idea of the climate alignment associated with a portfolio or investment vehicle.
As the scores only cover climate, it would be “an exaggeration” to say that they were intended to combat greenwashing, Mosberger added, but “any measure that helps to improve transparency to create a better understanding between the one who is offering a product and the one who is buying it to prevent different perceptions of what they get or what they should get is welcome”. Greenwashing is not a widespread practice in the Swiss market, according to Mosberger.
He also expressed the hope that high take-up and pressure from clients for institutions to adopt the scores would obviate the need to make them mandatory, but that he would support such a move “if it’s a useful thing to have and the market is not covering it”.
Many of Switzerland’s largest financial institutions were involved in the creation of the scores. UBS, Pictet and Credit Suisse took part alongside academics and NGOs including Greenpeace and the 2 Degrees Investing Initiative. UBS welcomed the scores, saying they would provide “common standards and increased transparency” and “play an important role in supporting our clients to make informed investment decisions and in driving the transition to a low carbon economy”. Credit Suisse put out a statement welcoming the launch as “an important development in tackling climate change”. Pictet had not responded to a request for comment at the time of publication.
The Federal Council said it had tried to work within existing frameworks, including the TCFD, rather than creating its own indicators from scratch in order to avoid “generating the duplications and additional costs” for financial market participants. It also consulted with international bodies including the G20, OECD and International Platform for Sustainable Finance to ensure international compatibility. Due to the urgency of climate change and the international nature of Swiss finance markets, the council said it made sense for Switzerland not to wait until an international scoring tool was available, but for the country “to play a pioneering role in financial climate transparency”.
The Swiss Bankers Association also launched two sets of guidelines on sustainability criteria for investment and mortgage advice on Monday. The guidelines will be mandatory for association members and voluntary for other banks.