Swiss Climate Scores to make a splash at the Singapore Fintech Festival

by James · October 17, 2022

Global warming has dramatic consequences for nature and human society. Aligning financial flows with international climate goals is therefore important. But how to find out if an investment portfolio is aligned?

Switzerland has emerged as the first country in the world to establish a set of internationally accepted transparency criteria for climate-adapted investments; the Swiss climate results.

On 29 June 2022, the Federal Council presented the Swiss climate results for the first time. The government recommended that Swiss financial market participants use Swiss Climate Scores on financial investments and customer portfolios where appropriate.

In this way, the financial sector can contribute to mitigating climate change and use climate-related transparency as a competitive advantage.

Swiss Climate Scores provide institutional and private investors with comparable and meaningful information on the extent to which their financial investments are compatible with international climate goals.

They contain indicators that not only reflect the current situation for global companies in the financial product or portfolio, but also show where these companies are currently positioned in relation to global climate goals that seek to reach the net zero goal by 2050.

Net zero means that global emissions of greenhouse gases cannot exceed the amount that can be absorbed by natural and technical sinks.

The voluntary use of the Swiss Climate Scores is intended to make investment decisions more efficient.

Investors can take advantage of financial opportunities in the transition to net zero and at the same time contribute better to achieving the climate goals.

At the upcoming Singapore Fintech Festival, Swiss Climate Scores will be one of Switzerland’s focal points to convince the international community of its pioneering role in financial climate transparency.

Table of Contents

These are the six indicators for the Swiss climate points

Greenhouse gas emissions: Covers all sources of greenhouse gas emissions from invested companies (scope 1-3), including relevant emissions from their suppliers and products.

Exposure to fossil fuel activities: There is scientific consensus on the need to phase out coal and stop funding new fossil fuel projects. The figures show the proportion of investments in companies that earn more than 5% of the income from such activities.

Verified commitments to net-zero: Companies are increasingly voluntarily committing to moving to net zero and setting milestones. The effectiveness of such commitments depends on whether milestones are credible, scientifically based and transparent.

Management to zero: Financial institutions can contribute to the transition to net-zero by aligning their investment strategy with a consistent 1.5°C decarbonisation pathway.

Credible climate management: Financial institutions can contribute to the transition to net-zero by engaging with investees on third-party verified, science-based net-zero-adjusted transition plans through 2050.

Potential for global warming: This is the level of global warming that would occur if the global economy acted with the same ambition as the companies in the portfolio. Some portfolios with climate targets may intentionally include investments in companies that are not yet on track to 1.5°C, but seek to actively contribute to the climate targets by improving the alignment of investee companies to bring a greater share of the economy in harmony over time.

To ensure that the Swiss climate scores continue to represent best practice in terms of climate transparency in the future, they will be regularly reviewed and, if necessary, adapted to the latest international findings, starting in 2023.

The financial industry’s template for implementation

On 5 October 2022, the financial sector, under the leadership of the Asset Management Association Switzerland (AMAS) and the Swiss Sustainable Finance Association (SSF), presented concrete proposals and a template for how implementation in the sector should be as simple and efficient as possible.

This template, based on expert consensus, is available to the public and provides users with the necessary definitions and calculations to better understand and report on the recommended indicators.

This first version of this template is a starting point and will be tested by industry players. The public is welcome to submit their feedback for future improvements.