Swiss Sustainable Finance (SSF) is celebrating its 10 year anniversary in 2024.
Liliana de Sá Kirchknopf heads the Private Sector Development department as part of SECO's Economic Cooperation and Development mandate. They strengthen among others, the capacities of the financial sector in developing countries in the area of ESG and green finance. At the same time, her department oversees SIFEM, the Swiss development finance institution. SIFEM promotes the growth of SMEs through impact investments, thereby creating more and better jobs.
Liliana, what motivated SECO’s involvement with, and support of, SSF over the years?
With limited start-up funding in 2014, SECO contributed to the establishment of Swiss Sustainable Finance (SSF) as a Swiss-wide association, which was an expression of support by the government for this association and the planned activities.
Switzerland is an important financial centre worldwide; more and more countries are positioning themselves internationally in the area of sustainability. It was important to us to utilise this competitive advantage for financing the UN Sustainable Development Goals in developing countries and to track progress on an annual basis. After all, Switzerland is host to well-known pioneers in the field of impact investing; Switzerland manages a third of private market funds in this area. But the competition never sleeps. SSF offered the opportunity to put the topic on the agenda of Swiss financial players and thus promote it further.
In your opinion, What are the most important advances that the Swiss financial centre has made in the area of sustainability over the last 10 years and to what extent has SSF contributed to this?
Sustainability is now mainstream in the financial sector and sustainable investments account for more than half of the Swiss investment market. SSF has made a significant contribution to this with its numerous activities – research and data provision, training courses, political dialogue, events in Switzerland and abroad. Today, with close to 250 members and partners, SSF is a driving force for greater sustainability in the financial sector. Some milestones of the Swiss government to which SSF has also contributed directly or indirectly: Federal Council report "Sustainable Finance Switzerland" (December 2022); application of the Swiss Climate Scores, Federal Council position on greenwashing (December 2022) and active international positioning of Switzerland such as through the Building Bridges Conference in Geneva.
SECO has been committed to promoting impact/blended finance for many years. What have been the most important successes?
Over the past years SECO has supported many initiatives connecting private and public investors to jointly finance sustainable development (see report: Switzerland for Sustainable Finance). The most recent example is the establishment of the SDG Impact Finance Initiative (SIFI), an association established in 2021 along with UBS Optimus Foundation, Credit Suisse Foundation and the Swiss Agency for Development and Cooperation (SDC) with the objective to scale impact investing in developing countries thereby mobilizing further private sector investments for the SDGs. It builds upon the 20+ years of experience and lessons learned of SECO working in this field. To encourage the development of innovative funds, SIFI uses a competitive approach to ensure that the best solutions are being funded to attract private investments: see SDG Impact Finance Initiative.
Another blended finance success story is the Private Infrastructure Development Group (PIDG), which was formed in 2002 by donor agencies including the Government of Switzerland. This initiative promotes infrastructure projects in developing countries through technical assistance, de-risking and equity as well as debt financing. Since its inception, PIDG has considerably grown in size and thereby increased its impact. With its successful track-record it has attracted more than 100 million USD by a large institutional investor into a fund enabled by PIDG, hence demonstrating the leverage that blended finance mechanisms can achieve.
What are the financial sector's most important levers in promoting the transition to a climate-friendly and sustainable economy?
The financial sector can set negative (e.g. exclusion of certain sectors or companies with a low ESG rating) or positive incentives (e.g. better conditions for green mortgages) when financing activities. The financial sector therefore has an important leverage function in the transition to a climate-friendly and sustainable economy. It can also offer credible sustainability- or impact-oriented products in asset management and thus make an important contribution.
Where do you see the greatest challenges for SECO, and other players, in these areas in the coming years?
How can we mobilise more capital from institutional investors to finance the SDGs in developing countries? What is needed for this? Adoption of existing or new regulation and do we need a Swiss finish? Is self-regulation enough in an area such as climate change, where society is confronted with the greatest market failure and where we are constantly reminded of the urgency? Sustainability is not a trend, it is the new reality and, as an innovative country, we should also be at the forefront here and contribute to solutions. We must see this as a competitive advantage.
How can SSF promote positive development in these areas?
With the decision to establish a National Advisory Board for Impact Investing in Switzerland as part of the Global Steering Group for Impact Investing, SSF can contribute to defining the ambitions for more impact-oriented investments in concrete terms and agreeing on measures needed. We can thereby consolidate Switzerland's leading role in this area and further expand it, amplifying the impact in developing countries. Furthermore, SSF could further strengthen the ecosystem with knowledge building around impact investing, for example through specific training modules or practitioners’ exchange on impact measurement.
If you could predict the future, Where do you see SSF in 10 years' time?
In 10 years, SSF has positioned Switzerland internationally in the field of impact investing thereby contributing to international efforts and collaboration. In addition, it has contributed to a significant increase of the Swiss share of managed assets. Switzerland is recognised as a global champion on the path to a carbon-neutral financial sector and inspires others with innovative solutions, also taking into account social aspects.