Sustainable investment in Switzerland

The fourth Swiss Sustainable Investment Market Study, jointly prepared by Swiss Sustainable Finance (SSF) and the Center for Sustainable Finance and Private Wealth at the University of Zurich, was released this week. The aim of this study is to give an in-depth overview into the dynamics of sustainable investments in Switzerland, pointing out the new trends and identifying where challenges and opportunities may lie ahead for investors.

After the impressive increase in the amount of sustainable investments in Switzerland in 2019 (+62% between 2018-2019), sustainable investments rose by 31% to CHF 1,520.2 billion in 2020, which is more than double the amount recorded two years ago. For the first time, over 50% of the assets of all investment funds managed in Switzerland apply one or more of the sustainability approaches covered in this survey. This result, once again, confirms the huge appetite for sustainable investments in Switzerland.

There are several reasons for this increase: the rise of the sustainability theme in public opinion, the performance of sustainability investments last year (which accounts for a third of the increase in assets) and the net inflow of capital. In addition, the number of participants in the SSF study (banks, asset managers, fund managers, pension funds) increased to 83 from 76 in the previous edition and again this year, QUAERO CAPITAL was part of the 83 respondents.

Source: Swiss Sustainable Investment Market Study 2021

Where is the growth?

The increase came from across all strategies, the ESG engagement approach is now classified second, up from third place last year and applies to 69% of sustainable investments. At QUAERO CAPITAL, we take dialogue with companies very seriously. By encouraging more responsible and sustainable behaviour from companies across industries, we can create much more value and more positive impact. The highest growth rate of all sustainable investment approaches in 2020 was experienced by impact investing with an annual growth of 70%. Another positive improvement is that a growing number of investors combine now three or more approaches for a more sophisticated investment strategy. At QUAERO CAPITAL since 2018, we have developed four approaches for our funds (exclusions, ESG integration, engagement and voting).

Source: Swiss Sustainable Investment Market Study 2021

Climate change a dominant subject

In line with momentum on the road to reach net zero carbon emission by mid-century, the more frequent ESG engagement theme was climate change risk management & reporting. At our level, it is also the case, and particularly with CDP campaigns where every year we request directly high emitting companies from our funds to be more transparent about climate change, deforestation, and water security to effectively understand their corporate impact and risks. Moreover, the study shows that the most frequently used exclusion criterion for sustainable investment assets is coal. This is a continuation of last year’s trend, when coal moved up from tenth to fourth place as the most used exclusion. This shows that the pressure for global carbon divestment has further intensified in 2020. At QUAERO CAPITAL, similarly, we integrated a climate exclusion list on companies that have a significant part of their business exposed to coal mining and coal powered energy without any public plan to significantly reduce it.

39 out of 45 asset manager participants to the study claimed that they explicitly address climate change and most of them by measuring the carbon footprint of their portfolios (87%), by investing in climate solutions (85%), by divesting of fossil fuels (62%) and by engaging and voting on climate change (59%). QUAERO CAPITAL takes climate issues into account as an integral part of our responsible investment policy, namely with our recent climate policy adopted end of 2020.

Source: Swiss Sustainable Investment Market Study 2021

The forecast for the next years

Most of the contributors to the study expect the market for sustainable investments to continue to increase in Switzerland at an annual rate of 15 % to 30 %.

The report emphasizes that the positive growth witnessed is primarily market-driven and based on rising demand from private and institutional clients. Secondly, new regulations and legislations and especially in the EU are seen as key drivers for sustainable investments and we can expect more extensive policy interventions in the coming years in Switzerland, Europe and globally as seen in the graph below.

Source: Swiss Sustainable Investment Market Study 2021