Zurich regional government joins growing calls for SNB climate action

The Swiss National Bank (SNB) – already the target of frequent climate protests – has come under further pressure after one of its largest shareholders passed a motion calling on it to align its policies with the Paris Agreement.

The motion was passed by the Zurich cantonal parliament with a narrow majority and has now been transferred to Zurich’s governing council to be acted upon. It requires the canton to exercise its shareholder rights to ensure that integrating climate risks into the SNB’s investment policy and risk management is on the agenda at a future general meeting.

Campaigners want the SNB to disclose its investment positions and associated greenhouse gas emissions, and to communicate its strategy to align with the Paris Agreement’s 1.5ºC trajectory and biodiversity targets. They are also demanding immediate divestment from fossil fuel projects.

Any move by the SNB to meet these demands would have significant global implications due to the enormous size of the central bank’s foreign currency portfolio. The SNB holds foreign currency assets worth well over US$1tn. Roughly a quarter of this is held in equities, with a further 10% in corporate bonds. It is the third largest foreign currency portfolio in the world, behind only the People’s Bank of China and the Bank of Japan.

A study last year found that equity owned by the SNB is associated with carbon pollution equivalent to nearly a quarter of Switzerland’s domestic emissions. Its portfolio generates between 12 and 20mn tonnes of CO2 per year, which could be reduced by 99.7% with a reallocation of just 2%, the academics reported. The research was funded by the Swiss National Science Foundation.

The SNB has already excluded coal mining companies from its investments, and excluded companies that systematically cause severe environmental damage from its holdings of foreign currency. It says it has also made purchases of green bonds.

Some lawmakers and SNB officials disagree over the extent to which the central bank is obliged to integrate environmental considerations into its activities. SNB governing council member Andrea Maechler has stressed the limitations on the SNB’s ability to act and warned that pursuing environmental goals could be detrimental to reaching its monetary policy targets.

However Beat Bloch, a cantonal councillor who supported the motion, said the SNB was violating the Paris Agreement by failing to comment on how it plans to deal with investments that fuel climate change.

The SNB’s narrow interpretation of its mandate is at odds with its eurozone counterpart. European Central Bank (ECB) board member Frank Elderson has acknowledged that the central bank has a legal obligation to contribute to the success of climate change-related policies in the bloc. The ECB is incorporating climate considerations into its monetary policy, including decisions on collateral and corporate sector asset purchases.