Swiss parliament rejects bigger climate role for central bank

April 29, 2024|Written by Katy Lee|Swiss National Bank

Switzerland’s parliament has rejected several proposals that would have forced the country’s central bank to acknowledge climate and wider environmental risks in drawing up its monetary policy.

The votes against several proposals put forward by the Green and left-leaning parties came as activists accused the Swiss National Bank (SNB) of massively underestimating its financed emissions – those linked to its investment activities.

The five identical proposals would have altered the law governing the SNB, requiring it to “take climate and environmental risks into account in the conduct of its monetary policy”.

But the right-leaning parliament opted to echo the position of outgoing SNB chief Thomas Jordan, who has defended a narrow mandate for central banks that rejects any active role in fighting climate change despite mounting evidence of the impact of environmental factors on price stability.

Jordan reiterated his stance at the SNB’s shareholders’ meeting on Friday, saying that while climate change was an important issue, it should be tackled by politicians and not central banks. “It is also important… we are serious and do not give the impression that we can solve all the problems of the world with monetary policy,” he said.

Asti Roesle, a finance campaigner with Switzerland’s Klima-Allianz, expressed dismay at the decision to turn down “a reasonable political motion”.

“The Federal Council and parliament should, as part of their supervisory and accountability duties to the SNB, critically compare and address the SNB’s foreign exchange portfolio and its negative environmental and social impacts with Switzerland’s commitment to international climate and biodiversity targets,” she said.

She pointed out that Switzerland’s new Climate and Innovation Act also commits the finance sector to decarbonisation, stating that “financial flows must be directed toward low-emission development that is resilient to climate change”.

“As a state institution, the SNB is also obliged to make its contribution to reducing the climate impact of financial flows. This also includes their own investments,” Roesle told Green Central Banking.

Swiss campaigners have long called for the SNB to adopt a greener investment policy for its vast foreign exchange reserves, which include major fossil fuel investments. Climate activists picketed the SNB’s shareholders’ meeting over the issue on Friday.

The SNB took a step forward in disclosing its carbon footprint for the first time in its most recent annual sustainability report.

However, the Unsere SNB (Our SNB) campaign group has claimed that the central bank’s financed emissions are about four times higher than estimated in the report.

Unsere SNB points out that the central bank did not take into account scope 3 emissions, those produced up and down the supply chains of the companies it has invested in.

This is despite the fact that scope 3 emissions “make up by far the most significant proportion of the financed emissions in the SNB equity portfolio and significantly exceed those of scope 1 and 2 emissions,” said Unsere SNB.

The SNB justified the omission of scope 3 emissions by pointing to inadequate data from companies in its portfolio.

“Both the limited availability of data and its quality are a reality,” Unsere SNB acknowledged. But continuing to ignore these emissions is “unacceptable”, it said, especially when taking into account the SNB’s investment approach of passive management of broad market indices of industrialised and emerging countries.

“Scope 3 emissions can account for around 80% of the total emissions of broad market indices,” the group said.

Roesle pointed to some brighter Swiss climate news as a factor that could help push the SNB to change its position: the victory of 2,000 older women who successfully sued Switzerland in the European Court of Human Rights.

The judges ruled that state authorities had a responsibility to protect citizens from the serious adverse effects of climate change. “As the SNB fulfils state tasks, it is bound by fundamental rights in all its actions,” Roesle said, citing arguments given in court.

“This duty to protect applies not only to emissions occurring on Swiss territory, but also to emissions abroad that are attributable to Switzerland,” meaning the SNB is arguably obliged by the ruling to reduce its overall financed emissions.

This page was last updated April 29, 2024

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