Digital library on sustainable finance
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The transition to a low carbon economy has potential risks to the financial sector, the so called "carbon bubble". Companies relying too heavily on fossil fuels are incorrectly valued on the stock market, because these valuations fail to consider the full cost associated with climate change and climate aligned policies. This study (1) assesses the carbon risks in the German economy, (2) conducts a carbon stress test for German financial institutions and (3) recommends regulatory instruments to mitigate carbon risks internationally.
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Final Report: Carbon Bubble - Analyses, economic risks, measures and instruments - EN
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Institutional asset owners globally are increasingly including social and environmental considerations into their portfolios and investment strategies. In addition to growing client expectation, regulatory pressures and the reality of the effects of climate change are also increasing.
This policy brief identifies key challenges that institutional asset owners face when setting impact priorities and realised strategies for overcoming such difficulties, investigates both top-down and bottom-up approaches to setting targets, and offers routine steps for investors to define their social and environmental priorities within their investment process. Significant opportunities exists for using asset owner portfolios as leading tools that serve their stakeholders, the planet and society at large.
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Institutional Asset Owners: Approaches to Setting Social and Environmental Goals - EN
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Measuring financed emissions is crucial in providing an understanding of climate-related transition risks to a portfolio. It also helps FIs to set an emissions baseline, develop science-based targets, act to reduce their portfolio climate impact, and disclose progress. This framework examines the necessary measures that can help the financial sector become Paris-aligned.
The Partnership for Carbon Accounting Financials (PCAF) is an industry-led initiative which enables financial institutions to consistently measure and disclose the absolute greenhouse gas (GHG) emissions associated with their loan and investment portfolios through GHG accounting.
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This impact report aims to measure the extent to which the Loans for Growth (LFG) fund meets its objectives to foster job creation, employment and entrepreneurship in emerging and frontier markets through small and medium enterprise (SME) finance. The LFG fund, launched in September 2016 and closed in September 2020, provided financing to SMEs by investing in local, specialized financial institutions. Over four years, the fund invested in 42 financial institutions across 24 countries
worldwide.
This is the final report in a series of four annual impact reports that follow a sample of enterprises financed by the LFG fund. The presented outcomes are based on surveys with 924 SMEs in 12 low and middle income countries between 2017 and 2020. Due to the global covid pandemic in 2020, many SMEs suffered losses, however over the course of the four years of investment there was a clear positive trend in outcomes: asset size, proportion of women employed and average wage rates.
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Many institutional investors have pledged to align their portfolios with decarbonisation trajectories aiming for net-zero greenhouse gas emissions by 2050, and this objective is being translated into engagements on the alignment of their portfolio as part of the net-zero investment framework. To tackle the limitations of traditional climate benchmarks, which are the fruit of a mix-up between climate and financial considerations, Scientific Beta has constructed the Climate Impact Consistent Indicies (or CIC indicies).
This paper presents the principles of Net-Zero investment frameworks, the bottom-up CIC Indices construction methodology that ensures consistency between the stock-level decisions and the overall climate impact goals. Further the climate-related and financial characteristics of the indices are evaluated.
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As part of a joint programme on "A Legal Framework for Impact", the PRI, UNEP FI and The Generation Foundation commissioned a legal analysis to determine the extent to which legal frameworks enable investors to consider impact in their activities across 11 jurisdictions: the EU, Australia, Brazil, Canada, China, France, Japan, South Africa, the Netherlands, UK and the US.
The report, authored by Freshfields Bruckhaus Deringer, found that while there are differences across jurisdictions and investor groups, where investing for sustainability impact approaches can be effective in achieving an investor’s financial goals, the investor will likely be required to consider using them and act accordingly.
It also provides an extensive suite of options for policymakers wishing to facilitate investing for sustainability impact, including changing investors’ legal duties and discretions, such as allowing the pursuit of sustainability goals as long as financial return goals are prioritised, and a presumption in favour of investor collaboration in tackling sustainability challenges.
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A Legal Framework for Impact: Sustainability impact in investor decision-making - EN
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The Global Sustainable Investment Alliance (GSIA) is an international collaboration of membership-based sustainable investment organisations around the world, with the mission is to deepen the impact and visibility of sustainable investment organisations at the global level. The 2020 Global Sustainable Investment Review (GSIR) is the fifth in a series of biennial reports. It maps the state of sustainable and responsible investment of major financial markets globally, reporting on data as at the beginning of 2020. The report shows the continuing prevalence of sustainable investment across the global investment industry, with assets under management reaching USD35.3 trillion, a growth of 15% in two years, and in total equating to 36% of all professionally managed assets across regions covered in this report.
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For the fourth consecutive year, SSF published its comprehensive market study shedding light on sustainable investment developments in Switzerland. In 2020, the sustainable investment volumes reported by banks and asset managers and internally managed asset owner increased by 31% to CHF 1,520.2 billion.
In addition, the market study chronicles regulatory developments that marked the sphere of sustainable finance and also features two interviews with government representatives and academia.
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Swiss Sustainable Finance Market Study 2021 - DE
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On behalf of Greenpeace, INFRAS and Inrate analysed 51 sustainability funds licensed in Switzerland and Luxembourg to examine whether sustainable investments have a positive capital allocation effect. The results showed that so far, these investments hardly succeeded in steering significantly more capital towards a sustainable economy than conventional funds.
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This report by the International Capital Markets Association (ICMA) provides an international overview of both official and market-based taxonomies.The aim is to further understanding for market players of what these various taxonomies entail and what commonalities and differences exist between definitions.
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Overview and Recommendations for Sustainable Finance Taxonomies - EN
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This report seeks to understand how deeply climate-related expertise is embedded within private equity firms and to explore what climate performance expectations they impose on the companies in which they invest.
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This report sets out concrete reporting recommendations for the ESG performance of assets, for both asset owners and asset managers. Relevant report items, both on a qualitative and quantitative level, are displayed with the aim of allowing investors to judge the ESG performance of assets and, where necessary, aggregate this for numerous portfolios.
The recommendations include aspects on both the issuing entity level, as well as on the portfolio asset level. As market participants are not all equally advanced in ESG integration and reporting, proposals are formulated on two levels: Foundational-level reporting for beginners, and Advanced-level reporting for more experienced investors.
The SSF Reporting Recommendations on Portfolio ESG Transparency are a starting point on the path to more sustainability transparency and credibility of Swiss investors. They will have to be tested by different investors and developed further, based on feedback.
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SSF Reporting Recommendations on Portfolio ESG Transparency - DE
SSF Reporting Recommendations on Portfolio ESG Transparency - FR
SSF Reporting Recommendations on Portfolio ESG Transparency - EN
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Improved measurement and modelling of the impacts of climate change on financial stability is needed to underpin a policy debate that is gaining momentum. This report deepens quantitative insights for the European Union, adding to a growing body of international research examining the impacts of climate change on financial stability. In particular, it seeks to fill key gaps in the empirical understanding of the impacts of climate-related risk drivers on financial stability.
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This publication sets out different actions for investors invested in real assets and seeking to implement the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). More specifically, it includes technical guidance on the actions for asset owners; example of peer asset owner practice on implementing the TCFD recommendations and reducing exposure to climate risk; questions to engage consultants or fund managers on TCFD and climate scenarios.
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In the context of the new CO2-law in Switzerland this paper examines climate risks for Swiss pension schemes, the consequences and potential solutions. The identified risks to pension schemes are reputational risks, regulatory risks, disruptive technology, “stranded assets”, and physical climate risks.
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Ethos Opinion Paper: Klimawandel: Die Renten der zweiten Säule sind gefährdet - DE
Ethos Opinion Paper: Klimawandel: Die Renten der zweiten Säule sind gefährdet - FR
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WWF, in collaboration with PwC, has published a rating of 15 of the largest Swiss retail banks, evaluating how environmentally conscious these banks are. Compared to the previous rating, in 2017, there was marked positive improvement in the overall sustainable corporate governance and 7 retail banks now reaching the overall rating of “Appropriate”. However, none of the reviewed banks were deemed to be “Trendsetting” or “Visionary”.
The most prominent area for improvement identified is the integration of the full range of investment and credit products when developing sustainability topics. Particularly, credit products financing sustainable projects are still rare.
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The Swiss insurance industry has published its second sustainability report on schedule on 27 May 2021, the first Swiss National Climate Day. The report confirms that the topic of sustainability has not diminished in relevance among insurers, in spite of the coronavirus pandemic: an increasing number of insurers are integrating ESG criteria in their investment process. Sustainability criteria are involved in 83 per cent of investments.
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Sustainability Report 2020 - DE
Sustainability Report 2020 - FR
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The action plan sets out 16 concrete proposals for a future-proof combination of digital technology and a sustainable financial sector in Switzerland.
The action plan was produced through the Green Fintech Network, a network of start-ups and experts in green fintech set up with the assistance of the State Secretariat for International Finance (SIF). The proposed actions range from setting up a platform for sustainability data to the launch of an innovation challenge for green fintech start-ups, to the promotion of open finance and the expansion of funding options for green fintechs. The actions aim to act as concrete incentives for authorities, associations, and the scientific and business communities to drive forward promising innovative solutions.
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This report explores how climate-related risk drivers, including physical risks and transition risks, can arise and affect both banks and the banking system via micro- and macroeconomic transmission channels.
According to the report, the economic and financial market impacts of climate-related risks can vary according to geography, sector and economic and financial system development. The traditional risk categories used by financial institutions and reflected in the Basel Framework (eg credit risk, market risk, liquidity risk, operational risk) can be used to capture climate-related financial risks. Nevertheless, There is limited research and accompanying data that explore how climate-related risks feed into the traditional risks faced by banks. A better understanding of climate risk drivers and their impact on banks' exposures across all risk types would be gained from further research by a broader community.
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Climate-related risk drivers and their transmission channels - EN
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This report provides an overview of conceptual issues related to climate-related financial risk measurement and methodologies, as well as practical implementation by banks and banking supervisors.
According to the report, climate-related financial risks entail unique features, which means that sufficiently granular data and forward-looking measurement methodologies are needed to address them. To date, measurement of climate related financial risks has centred on mapping near-term transition risk drivers into bank exposures. Credit risk measurement has attracted the most effort, with a lesser focus on other risk categories. Initial scenario analyses and stress tests have in many cases focused on selected portfolios or exposures for transition risks, and selected hazards for physical risks. Key areas for further analysis relate to gaps in data and risk classification, as well as methodologies to address uncertainties associated with the nature of climate change and the potentially longer time horizon for risks to manifest.
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Climate-related financial risks - measurement methodologies - EN
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This report provides insights into the implications of climate change for the operations, governance and role of central banks. It covers initiatives such as the EU Action Plan and their impact on global central banking, central bank mandates to respond to climate-related risks, an overview of measures already being taken by selected central banks and a matrix assessing the impact of proposed measures on the divisions of central banks. The paper also makes recommendations how central banks can introduce changes to portfolio management and monetary policy, risk management and financial stability and additional supporting measures.
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The seventh edition of the Global Green Finance Index (GGFI 7) was published on 29 April 2021. GGFI 7 provides evaluations of the depth and quality of the green finance offerings of 78 major financial centres around the world and serves as a valuable reference into the development of green finance for policy and investment decision-makers.
The GGFI is compiled using 140 instrumental factors. These quantitative measures are provided by third parties including the World Bank, the Economist Intelligence Unit, the OECD and the United Nations. The instrumental factors are combined with financial centre assessments provided by respondents to the GGFI online questionnaire, using 4,536 assessments from 739 respondents.
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This report, published by the Climate Bonds Initiative, assesses the scale and depth of the green, social, and sustainability debt markets as of the end of 2020. The market analysis examines the changes in the debt markets during 2020 and also includes a forward-looking spotlight section, which explores the development of transition, green recovery finance and EU green market leadership, three themes that will continue to influence market growth into the 2020s.
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Buildings account for 36% of global greenhouse gas emissions and are therefore key for reaching the carbon targets pledged within the context of the Paris Agreement. Through its investment and financing activities, the financial system is closely intertwined with the building industry.
For the effective integration of sustainability considerations into finance, a "technical" discussion around which buildings can be classified as climate-friendly and sustainable is thus important. Against this background, this report identifies criteria for determining the environmental sustainability of buildings in Switzerland. In doing so, reference is made to the work of the EU's Technical Expert Group on Sustainable Finance and the international Climate Bond Initiative.
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Kriterien für klimaverträgliche Gebäudefinanzierung in der Schweiz - DE
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This final report covers the information to be provided by non-financial undertakings and asset managers to comply with their disclosure obligations under the Non-Financial Reporting Directive (NFRD).
The recommendations define the Key Performance Indicators (KPIs) disclosing how, and to what extent, the activities of businesses that fall within the scope of the NFRD qualify as environmentally sustainable under the Taxonomy Regulation. The key recommendations relate to the definitions to be used by non-financial undertakings for the calculation of the turnover KPI, the CapEx KPI and the OpEx KPI, and the KPI that asset managers should disclose.
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Final Report. Advice on Article 8 of the Taxonomy Regulation - EN
