Switzerland: sustainable investments again show double-digit growth

The renewed market growth of sustainable investments has been a major success, according to the recent survey by Swiss Sustainable Finance (SSF) published study (cf. SSF_2021_MS_D_Summary) is essentially attributable to two main factors: On the one hand, the increased use of sustainable investment approaches on existing assets and, on the other hand, the positive market performance in 2020, which is responsible for around one-third of the observed growth. Furthermore, inflows into existing sustainable funds contributed to growth, albeit to a lesser extent. The volume of sustainable funds increased by a proud 48 percent, accounting for more than half of the total Swiss fund market for the first time at 52 percent (2019: 38 percent). "This is a success story that is also manifested in the rising sustainable investment volumes of institutional investors (+ 15 percent) or sustainable mandates (+ 29 percent)," comments Sabine Döbeli, CEO of SSF. Investment practices are also becoming more sophisticated: overall, 87 percent (2019: 83 percent) of total sustainable investment volumes combine two or more sustainable investment approaches.

Impact investing gains in importance

The market for sustainable investments is about to enter a third era. The financial industry refers to this development as "Sustainable Finance 3.0". Due to the fact that ESG criteria are now broadly integrated into the financial markets, investors are increasingly demanding a stronger focus on impact. This year's study also shows that investors are increasingly focusing on impact. For example, ESG engagement now ranks second thanks to the second strongest growth - an improvement on last year's third place. The impact investing category still has the highest growth rate of all sustainable investment approaches at 70 percent. The fact that investors are placing increasing emphasis on impact is also reflected in the measures they take when investment companies violate sustainable standards. Previously, this usually led to the exclusion of the company in question from the investment universe. In 2020, by contrast, the most common action taken by both asset managers and asset owners was to intervene and seek dialogue with the company in question. "The dialog approach is far more effective in changing behavior than pure sales strategies," says Prof. Timo Busch, Senior Fellow at the CSP and co-author of the study.

Sustainability certificates and labels as a guide

Independent verification of investment processes is an important step on the way to creating transparency and trust. Fortunately, the acceptance of independent sustainability certificates and labels is increasing. While only six percent of reported sustainable funds were labeled with independently certified labels in the previous year, this share has more than quintupled as of the end of 2020, according to data. Specifically, 32 percent of the sustainable fund volume was certified by third parties (for example, FNG seal, GRESB, Label ISR, LuxFlag) last year. However, the process towards a uniform and binding definition of what exactly the label "sustainable" means is not yet complete and requires further efforts from market players, especially as investors expect more clarity and improved transparency on sustainable investments. SSF will therefore publish recommendations for transparency on the sustainability of portfolios in June, which were developed in collaboration with asset managers and institutional investors.

The study was supported by the six main sponsors AXA, Kieger, Schroders, Swiss Life Asset Managers, UBS and Union Bancaire Privée (UBP), as well as the six secondary sponsors Amundi Asset Management, Banque Cantonale Vaudoise, Basellandschaftliche Kantonalbank, GAM Investments, Graubündner Kantonalbank and swissQuant Group AG.

Press release SSF

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