Sustainable Finance: Handbook of Economics
The market for sustainable investments continues to grow at a high rate: its volume should have exceeded 2,000 billion francs. Sustainable finance for Switzerland, an international financial and industrial center, therefore provides an opportunity to be a leader in this field. As McKinsey research in collaboration with Economiesuisse and WWF shows, the Swiss economy has an indirect impact on gigatons of emissions (CO₂ equivalents) and is therefore a lever to strengthen sustainable economic activities through financial flows. . Switzerland also has a very active ecosystem of associations, which are constantly committed to improving the framework conditions, thereby making a decisive contribution to the strengthening of the Swiss financial center.
Challenges must be seized
Although sustainable finance has continued to develop in recent years, uncoordinated and sometimes divergent initiatives and regulations are still legion in the field (e.g. the International Council on Sustainability Standards, the EU taxonomy or reporting obligations). On the one hand, these developments provide an opportunity for Switzerland to develop its role as an innovative and progressive business location. On the other hand, as a small state, it should take into account international events in a pragmatic and proportionate manner and ensure communication with the international environment. Indeed, the fragmentation of legislation leads to high costs for SMEs in particular and great uncertainty for the Swiss economy as a whole. Continuous funding can lead to administrative burdens and operational costs, especially if requirements are not aligned or taken hastily.
Six principles to ensure success
To make the most of the opportunities presented by sustainable finance while addressing the challenges, the whole economy has developed six guidelines:
- A global overview of the environmental, economic and social dimensions of sustainability. Swiss business understands sustainability and sustainable financing at all levels of sustainability and sees environmental, economic and social goals as interdependent.
- An approach based on market and facts, not prohibitions. All companies’ efforts to achieve sustainability should be considered, and investors should retain the ability to decide which technologies are particularly promising.
- Increasing transparency and comparability flexibly and efficiently by reducing transaction costs. Creating transparency allows you to assess sustainability criteria and therefore define your activities in terms of their impact and risks.
- Improved framework conditions for deployment and investments. Economic circles demand the elimination of fiscal and bureaucratic obstacles. However, this should not create a situation where sustainable financial instruments are preferred – a level playing field should remain.
- Ambitious and internationally coordinated approaches, but also an autonomous and confident approach. For the proper functioning of the market, high-quality and above all comparable information is essential. A “Swiss Finish” must also be rejected.
- Strengthening cooperation between the financial sector and the real economy. Sustainable finance stems from the desire to see a sustainable real economy emerge. This in turn can create an incentive.
A practical example in the real economy
The example of the cement industry shows that sustainable finance can be both an opportunity and a challenge. Cement and therefore concrete is the main building material today. Although its production generates significant CO₂ emissions, companies have succeeded in significantly reducing greenhouse gas emissions and still have great potential to reduce emissions: since 1990, Switzerland’s total CO₂ emissions have fallen by around 35%. This is thanks to, among other things, the reduction of the share of clinker in cement or the optimization of the efficiency of the processes, as explained in the sector’s 2050 “Target: climate-proof cement” roadmap. To continue to exploit this potential, the sector needs targeted investments. However, if regulations go too far and sustainability criteria are defined too narrowly, the sector risks losing access to capital. At the same time, reporting obligations can lead to high administrative burdens and become a problem for suppliers and customers, which can threaten Swiss production. Therefore, the main objective of sustainable finance should be transformation as much as possible with the help of the real economy, including the financial sector and companies in the cement sector, otherwise the climate goals will not be achieved. .
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