A three-dimensional view
There’s total alignment between financial institutions, the public, associations and federal authorities – a united front in favour of sustainable finance; and it’s the hobbyhorse of Switzerland’s fi-nancial centre, especially Geneva. The figures speak for themselves: assets under management in Switzerland in 2019 totalled around CHF 7,000 billion. Of that, 1,100 billion was invested sustainably1, a year-on-year increase of 62%. And, given their geographical and historical proximity to the United Nations, its agencies and the powerful ecosystem of humanitarian organisations, Geneva’s financial institutions are particularly well placed to make hay here.
Laurent Ramsey, Managing Partner of Pictet & Cie and Vice-Chairman of the Geneva Financial Centre Foundation, came to deliver a strong message at the annual conference of the Foundation. He spoke of the “Spirit of Geneva”, a tradition of commitment on the part of banks and institutions in the Geneva financial centre to environmental and social causes. He also recalled that the Swiss Bankers Asso-ciation (SBA), the SFAMA, Swiss Sustainable Finance (SSF) and the Federal Council had published texts in June that were “fundamental to positioning Switzerland as a key international hub”.
How has the alliance between the international organisations and the Geneva financial centre come about?
Well, let’s look at some of the key points. Geneva’s the home of the UN’s Sustainable Development Goals, which today serve as the basis for a fair allocation of financial flows worldwide. Impact investing was born in Switzerland. The collaboration between “International Geneva” and “Financial Geneva” led in 2019 to the first Building Bridges summit, which sought to forge stronger ties between the two worlds. This event is scheduled to be repeated next year. But the relationship between these two worlds is not limited purely to finance. An example of this is the Prix Pictet, created more than 10 years ago to raise public awareness of sustainable development issues through photography. Its Honorary President until his death was Kofi Annan, Secretary General of the United Nations for ten years and a Nobel Peace Prize winner.
How do you see sustainable finance in the next few years?
There are currently several approaches: exclusion, best in class, thematic investment and impact investing, which is the rising star of responsible finance. The amounts under management for impact investing in Switzerland quadrupled between 2018 and 2019. Others will emerge, and I think it’s vital that multiple approaches can coexist in the future. The taxonomy being put in place by our European neighbours will be a major step forward. It’s essential that we don’t simply standardise sustainable management, so that we can preserve all its richness. Given the climate emergency we’re facing, the European action plan is welcome and the regulatory framework will speed up the transition – even if it will weigh on costs. However, the choice of objectives and methods has to remain with the financial players.
Will it require more in-depth expertise from asset managers?
Definitely. They’ll need to be more proactive. Their fiduciary obligations will mean that they have to analyse a greater number of factors that have a material impact on investments. This will result in a shift to more virtuous assets and therefore a reallocation of capital. They’ll also have a duty to engage with the management of companies to influence them to adopt strategies in line with ESG standards. From now on, sustainability will be included in the training of client advisors.
Is index management able to meet the requirements of sustainable investment?
The growing number of ETF holders can play an important role in sustainability-oriented capital allocation. But the index providers still have to play the game in good conscience. I’d like to men-tion here the initiative of Swiss Sustainable Finance in 2018 to exclude companies connected with non-conventional weapons from the main indexes2. The discussions weren’t easy. And there’s still work to be done on passive management.
Are there any obstacles to developing sustainable finance in Switzerland?
As far as I’m aware, the only obstacles are tax related. As Yves Mirabaud confirmed at last week’s conference, stamp duty and withholding tax are handicaps to the expansion of sustainable Swiss finance. And especially to the issuing of green bonds.
Are there any concluding remarks you’d like to make?
Today’s dialogue with clients invariably focuses on ESG. Performance and risk are no longer the only angles to consider. ESG preferences are now the third topic of conversation. From now on, the way we look at private and institutional asset management will be three-dimensional.
©2020, Nicolette de Joncaire, Allnews
Original interview in French published in Allnews, Monday 12 October 2020. Translation to English by the Pictet Group.