Posted on 19 March 2019
The EU Action Plan for “Financing Sustainable Growth” will drive a paradigm shift in financial markets and could offer the Swiss financial sector significant new business opportunities.
A new study, 'Paradigm shift in financial markets - the economic and legal impacts of the EU Action Plan on sustainable finance on the Swiss financial sector', published by PwC Switzerland and WWF Switzerland makes clear, however, that these opportunities will only be realised if the Swiss government adjusts the rules on sustainability in the Swiss financial sector and if companies fundamentally change their way of doing business.
EU Action Plan puts Switzerland on the spot
In the next two years, the EU Action Plan, 'Financing Sustainable Growth', will push the European financial sector towards sustainability at an increased pace.
In response, Switzerland must adjust its regulatory framework so that its financial sector continues to have access to the European market and is able to keep pace with international developments.
“A reorientation and rapid implementation of the EU rules is also required in the Swiss financial sector, so that Switzerland does not become an isolated island for non-sustainable financial investments,” says Ivo Mugglin of WWF Switzerland. "The matter has still not been adequately discussed, creating great uncertainty and incalculable risks for the financial sector."
The EU Action Plan defines new norms and standards and changes the financial market regulatory structure by integrating sustainability and raising levels of transparency, measurability, comparability, data quality and data accessibility. It is a game-changer for the financial and many related sectors and institutions.
The PwC WWF study makes the following concrete recommendations:
- The Federal Council should ask the federal administration to draw up a sustainable finance action plan for Switzerland. This must comprise legislative measures and incentives so Switzerland can once again take a leading role in sustainable finance.
- The Federal Council should establish a committee of experts (with representatives from the finance industry, think tanks, academia and civil society) to reflect on and define how Switzerland needs to adjust to the new legislative parameters of the EU action plan, expand the knowledge base on sustainable finance, and comment on the Federal Council's Swiss sustainable finance action plan.
- Every Swiss bank, insurance company and asset manager should examine the EU sustainable finance action plan at senior management level and take any measures required.
The study also shows that without transparency on sustainability standards, the access that Swiss financial institutions have to the EU market may be at risk. If business with EU clients disappears, there would be significant consequences for financial institutions such as banks, insurance companies and pension funds.
Four key EU sustainable finance points
- A unified EU classification system will make it possible to distinguish between sustainable and non-sustainable financial products and to make better-informed investment decisions.
- Investor duties (often known as 'trustee duties') will be clarified. Asset managers and institutional investors must in future show to what extent their investments are aligned with sustainable objectives and demonstrate how they are complying with their duties.
- Climate risks and opportunities will be included in benchmarks - covering low CO2 emissions and positive CO2 effects.
- Advice to private clients in the banking and insurance sector must in future include sustainability considerations.