Sustainable finance has gained considerable significance in recent years. The topic covers a broad range of environmental, social and governance issues. Green finance focuses on how the business world is dealing with climate change.
Climate change poses a challenge to financial institutions in a number of ways. For a start it entails physical risks, for example in the form of rising natural catastrophes and their associated costs. Insurers’ loss amounts could increase as a result. Financial in stitutions are also exposed to climate policy measures. Changes in political guidelines can quickly trigger asset price adjustments or weaken companies’ creditworthiness. At the same time, the transition process to a more sustainable economy also offers financial opportunities. FINMA is actively assessing potential climate-related financial market risks. Despite their particularities, these risks affect all the traditional risk categories, such as credit, market or operational risks. The onus is on the financial institutions themselves to minimise potential climate risks and, where necessary, to develop the necessary instruments and processes. FINMA is also analysing where supervised Swiss institutions are subject to increased climate-related financial risks and highlighting these risks to the institutions with the highest exposure.
In addition, FINMA actively participates, within the scope of its mandate, in national and international discussions on increasing financial market sustainability. In April 2019, it joined the Network for Greening the Financial System (NGFS) – a network of central banks and supervisory authorities addressing environmental and climate risks in the financial sector.
(From the Annual Report 2019)