Swiss Sustainable Finance: Unbroken growth
According to the Swiss Sustainable Investment Market Study 2019 by Swiss Sustainable Finance (SSF), CHF 716.6 billion was already invested sustainably in Switzerland as of the end of 2018. The unabated increase of 83% can be attributed to the fact that more and more institutional investors are focusing on sustainable investment strategies and numerous asset managers are also integrating sustainability aspects into their processes as standard.
The latest Swiss Sustainable Fiance study shows that emerging regulatory requirements and increased social dialogue about climate risks and other global challenges are accelerating demand for Swiss sustainability portfolios.
Sustainable fund volume doubles
Sustainable investment funds grew the most significantly with 102%, primarily due to increased systematic integration of sustainability aspects into asset management. At CHF 190.9 billion, sustainably managed funds now account for 18.3% of the fund market - more than ever before. Sustainable assets managed by institutional investors themselves have also increased massively to 91%, driven primarily by pension funds and insurance companies newly participating in the study. The CHF 455.0 billion in sustainable institutional assets under management now already equates to 31% of the total assets held by Swiss pension funds and insurance companies. The increase in sustainable mandates was somewhat more moderate, from 22% to CHF 70.8 billion. A total of 77 organizations - 11 more than in the previous year - took part in the survey.
Institutional investors as main drivers of development
Banks and asset managers manage a share of 37% of all sustainable assets in Switzerland, while sustainable assets managed by institutional investors themselves account for two-thirds of these funds. "The share of assets held by institutional investors is even significantly higher at 88%, as substantial parts of the assets managed by banks and asset managers are also in institutional hands," explains SSF Managing Director Sabine Döbeli. ESG integration is the investment approach most commonly used. "Since exclusions have also become much more important, standards-based screening was relegated to third place," explains Prof. Timo Busch, Senior Fellow at the Center for Sustainable Finance and Private Wealth, University of Zurich, who provided scientific support for the study. The share of sustainable real estate investments has increased again and now accounts for the largest share of all sustainably managed assets at 24.2%, followed by equities at 21.3%. Corporate and government bonds follow with shares of 19.9% and 14.4%, respectively.
Focus on climate protection and UN sustainability goals
Climate change risks are on the minds of both product providers and institutional investors. "Twenty-five providers offer products specifically related to climate change, with investing in climate solutions as the top strategy pursued by 84% of respondents," explains Jean Laville, deputy managing director of SSF. Measuring the carbon footprint of portfolios (76% of climate providers) ranked second, he added. In the context of engagement, climate change is an important issue for both institutional investors and asset managers. The proportion of asset managers offering products specifically related to the UN Sustainable Development Goals has increased from 38% to 51%. Apparently, various providers have implemented the previously declared plans.
EU action plan also concerns Swiss players
The EU action plan for financing sustainable growth led to the drafting of various bills, some of which have already been passed or are about to be passed, as an overview in the Market Report shows. Naturally, this also concerns Swiss providers, as many of them are active across borders. But institutional investors are also watching developments in Europe with interest, as illustrated by the two interviews with the directors of the pension fund association ASIP and the Swiss Insurance Association. In Switzerland, there has also been an increase in political initiatives on sustainable investments in recent legislatures. Even without legal requirements already in place today, all study participants expect sustainable investment volumes to grow by 15% or more in the current year.
Specialized expertise as a competitive advantage
Sabine Döbeli draws a positive conclusion: "The significant growth in the Swiss market for sustainable investments reflects the fact that it is increasingly becoming standard practice to take environmental, social and governance issues into account when making investment decisions. Switzerland has specialized expertise in sustainable investments, which will benefit it in the increasing competition for clients."
