Mobilizing funds to address climate change

Mitigating climate change requires significant investment, with the Glasgow Financial Alliance for Net Zero estimating the need at USD 3.2 trillion.

Private capital is crucial, but investors demand risk-adequate returns. The Swiss Federal Council’s Sustainable Finance Strategy 2022-2025 outlines measures to promote financial flows with climate impacts and adapt financial market laws for impact investments. 

Patrick Schmucki, Corporate Responsibility Officer at KPMG Switzerland interviewed Christoph Baumann, Envoy for Sustainable Finance at SIF, on the opportunities of sustainable finance for the Swiss financial sector, the role of regulation and what is needed in the future to meet the ambitions of the Federal Council. 

Patrick Schmucki: Could you briefly explain why sustainability is important to you personally and how you see your own role in this area? 

Christoph Baumann: The transition to net zero and tackling biodiversity loss are two of the biggest challenges we face. In my position as Envoy for Sustainable Finance at the State Secretariat for International Finance, I can actively shape the framework conditions and that’s personally very motivating, also as a parent of two daughters who will be much more exposed to the consequences of these global challenges. 

It is great that the Swiss financial industry is absolutely behind sustainable finance and sees the transition to net zero as an opportunity. I don’t need to convince industry leaders on the overall direction. As a community, we are debating the most effective levers to reach the goals, but there is agreement about the goals themselves, in particular the transition to net zero by 2050.

That aspect is very motivating. Obviously, there are challenges to overcome when dealing with lots of different stakeholders. People look at problems from different perspectives. It’s part of my job to bring together what can be conflicting views and find a compromise that is both effective and pragmatic.  

You said that industry leaders see the transition as an opportunity. Can you explain in more detail what this means for Switzerland and for our financial institutions?

The transition to net zero is probably the largest shift in capital we have seen globally since industrialization. Whenever there’s a major shift in capital, there’s also a huge opportunity for financial institutions to provide that capital. But to make the most of the possibilities, financial institutions need to position themselves credibly through their service offerings and the advice they provide to corporates, SMEs and private clients.

Personally, I see this shift as highly significant not only for the financial center itself, but also for Switzerland. We’re very active on the sustainable finance front in many international organizations including the G20, the International Platform on Sustainable Finance and the Coalition of Finance Ministers for Climate Actions. Switzerland is one of a small group of countries actively shaping international policy-making in the area of sustainable finance. 

It has been suggested that Switzerland is a laggard when it comes to regulation. What’s your take on that?

We’re a laggard in terms of bureaucracy – and that’s a very good thing. If you overdo the red tape, sustainable finance risks becoming a tick-the-box exercise. We’re the only country to have had a popular vote on net zero by 2050. To my knowledge, we’re the only country that requires every company headquartered in Switzerland to be net zero by 2050 in terms of Scope 1 and Scope 2 emissions. And we’re the only country in the world to have enshrined in law that financial flows need to be aligned with the goals of the Paris Agreement. The law also mandates the government to ensure that financial institutions contribute to climate change mitigation.

All this already puts us in a strong position. Then you have our Climate Reporting Ordinance, which includes mandatory transition plans in accordance with the TCFD recommendations across the economy for larger companies. 

On the product side, for example when it comes to greenwashing…

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