Switzerland to repeat study of asset owner alignment to 2°C and roll it out internationally

The Swiss government is to repeat in 2020 a revelatory survey of the country’s pension funds and insurers first carried out in 2017 examining their alignment with a 2°C climate scenario, after results from the initial study showed average alignment of their investments was closer to a 4-6° warming scenario.
Switzerland is also looking to roll out the tests internationally as part of its commitment to the 2015 Paris Climate Change Agreement.
René Weber, Head, Policy Co-ordination Division, State Secretariat for International Finance, Switzerland, said that awareness of the worrying results of the first study had spurred further action and greater dialogue with the country’s asset owners.
Speaking at the OECD’s Forum on Green Finance and Investment last week in Paris, he said: “We will repeat this exercise in 2020 to do the same, but with more elaborate testing, including more variables. The test will be run on a free-of-charge, open-source model. The Swiss Environment Ministry aims to roll out the climate testing internationally and is calling for governments to join us. All partner countries that are interested can join what we are calling the PACTA, the Paris Agreement Capital Transition Assessment.”
Back in 2017, RI reported that Swiss asset owners were under pressure to disclose the results of the first set of tests. At that time, 79 of the country’s pension funds and insurance companies, managing two thirds of its assets, disclosed their equity and corporate bond portfolios under the voluntary initiative run by the Swiss Federal State of the Environment and the State Secretariat for International Finance.The portfolios were assessed by the 2° Investing Initiative – who will also conduct the 2020 study – to see how they aligned with national commitments under the Paris Agreement, which Switzerland ratified in 2017.
Each asset owner respondent was given their results along with voluntary guidance on improving their alignment with a 2°C target.
Subsequently, Klima-Allianz Schweiz – a Switzerland-focused climate network whose 73 members include NGOs, political parties and church groups such as WWF, the Green Liberal Party of Switzerland and the Swiss Quakers – launched a campaign to get the pension funds to disclose their results to their beneficiaries, although only a handful did.
Weber said he had heard that Swiss pension funds are restructuring their portfolios and allocating more assets to low carbon investment solutions.
He added: “There is a strong business case for sustainable finance and it is mainstreaming. We can’t achieve our national climate goals without the support of the private sector. So how do we get traction for this? In Switzerland, We are now on a voluntary/cooperative approach with the financial sector on this. There are a few guiding principles: transparency (to better carry out risk assessments including reputation risk), price signals, and strong support for the development of a green taxonomy and remove of the obstacles holding back green investment. We have questions also on fiduciary duties? Do we need to do something in addition to that? We will be looking at all of this as part of the 2020 study.”