Third climate compatibility test for the Swiss financial sector
For the third time, the Swiss Federal Office for the Environment (FOEN) and the Swiss State Secretariat for International Finance (SIF) have carried out a climate compatibility test using the PACTA method. Twenty insurers also had their portfolios tested for their climate compatibility. The results of the third round show that some companies are well on their way to net zero, but further action is needed across the industry to make financial flows more climate-friendly.
After previous rounds in 2017 and 2020, the Swiss Federal Office for the Environment (FOEN), together with the Swiss State Secretariat for International Finance (SIF), conducted the third, comprehensive climate compatibility test based on the international PACTA method (Paris Agreement Capital Transition Assessment) in 2022. This test is used to check financial portfolios with regard to their climate compatibility using a variety of indicators.
A total of 133 financial institutions volunteered to be tested in this third round, having submitted a total of 2300 billion Swiss francs in assets. Moreover, half of all real estate owned by institutional investors as well as Swiss residential buildings covered by mortgages were examined.
The industry is committed to greater transparency
The Swiss Insurance Association (SIA) has supported the voluntary climate test initiative from the start. This year, too, it recommended its member companies to seize the opportunity of this situation assessment. Overall, 20 private insurers, who submitted combined assets of 342 billion Swiss francs, participated in this year's climate compatibility test. Compared to 2020, insurers subjected more portfolios to the analysis. ‘The number of insurers who again took part in the PACTA climate test shows that our industry is committed to greater transparency and a sustainable financial centre,’ says Kristine Schulze, Sustainability Specialist at SIA.
While the results of the third climate compatibility test reveal further need for action, they also highlight that the number of good examples is increasing across all asset classes in the financial sector. Some companies are indeed making good progress towards climate neutrality. This shows that the financial market can make an important contribution to reducing climate change, and that the federal government’s strategy of orienting itself towards the primacy of market-based approaches is working.
‘The number of insurers who again took part in the PACTA climate test shows that our industry is committed to greater transparency and a sustainable financial centre.’
However, further measures are needed across the entire financial sector in order to stay on track with the Paris climate targets. One key to this might be what is known as ‘peer learning’, in which financial sector companies share examples of their best practices with each other and support one another on the way to climate neutrality. ‘SIA wants to play an important role in this discourse and promote the exchange between its member companies and other industry representatives,’ says Kristine Schulze. The next federal climate compatibility test is scheduled for 2024.
The climate compatibility test is available on the FOEN website in German, French or Italian.
Sustainability as a strategic direction for Swiss private insurers
For SIA, anchoring sustainability is a key element of its 2020–2024 strategy. It published its third sustainability report this year to be able to present this commitment and the progress made more trans-parently. The report summarises the sustainability efforts in the Swiss insurance industry with a focus on capital investments. ‘In addition to capital investments, insurers also have effective leverage in the areas of prevention, underwriting and product management to contribute to a more climate-friendly economy,’ stresses Kristine Schulze. The insurers support federal efforts to reach net zero by 2050. In order to continue resolutely on the path towards sustainability, SIA has joined the Net Zero Asset Owner Alliance as a supporter.