For financial flows without environmental degradation abroad

Felling rainforests helps drive environmental degradation and global warming. That is common knowledge. Besides, illegal slash-and-burn practices often curtail the land rights of indigenous communities and also violate their human rights. Switzerland's banking major UBS knows this. Yet it invests in large Brazilian agribusinesses that are involved in illegal forest clearances in the Amazon, as revealed some time ago by the Society for Threatened Peoples.

Each year, Swiss banks and insurance companies fund or insure billions worth of business operations that degrade the environment and drive global warming. According to a McKinsey study, the Swiss financial centre is responsible for as much as 18 times the amount of carbon emissions generated in Switzerland. Already ten years ago, the international community enshrined in Article 2.1(c) of the Paris Climate Agreement the key role of the financial system in addressing the climate crisis. It laid out the goal of "making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development." Switzerland has ratified the Agreement and is bound by international law to contribute to achieving this goal. Approved by an overwhelming majority of Swiss voters, the Climate Protection Act further requires the federal government to ensure the climate-friendly orientation of financial flows. But implementation is not going smoothly.

"Voluntary" assumes that there is a will

The Federal Council is relying on voluntary and self-regulatory implementation measures by the finance industry, and rejects any additional state regulation. It did, however, support a motion by National Councillor Gerhard Andrey (Greens) which provided for more stringent actions, should the measures in place prove ineffective by 2028. The Parliament rejected the motion in the spring of 2024, however, and saw no need for further action.

By January 2025 at the latest, it became clear why the financial sector's voluntary measures and promises were worth so little. The six largest American banks and the world's biggest asset manager BlackRock reneged on the climate promises they had made just four years earlier. Speaking on Western Switzerland television RTS, Professor Florian Egli of the Technical University of Munich said: "We are now seeing that voluntary promises by these banks are not enough. They have reneged on their promises." The UBS, too, is considering withdrawing from the Net Zero Banking Alliance, in which, since 2021, numerous banks had committed to a net zero target by 2050. The banks therefore want to continue funding environmental degradation, if it increases their profits.

The Financial Centre Initiative is needed

Anyone relying on voluntary measures is exposing itself to the whims of the financial sector, which is obviously guided not by climate science but by easy money and political winds. This is no way to combat the climate crisis. The International Energy Agency has long made clear in its Net Zero Roadmap that promoting new fossil fuel extraction is not compatible with meeting the Paris climate goals.
This prompted Climate Alliance Switzerland to launch the "Financial Centre Initiative" in late 2024, jointly with the WWF, Greenpeace and politicians from all the federal parties except the right-wing SVP. It is intended to ensure that no one else operating out of Switzerland finances environmental degradation and global warming. Should the Government and Parliament continue to sit on their hands, the electorate has the power to amend the Constitution to prohibit Switzerland's financial sector from funding or underwriting any additional extraction of coal, oil or gas. The same rules would then govern all players.

Alliance Sud supports the popular initiative in order that Switzerland can finally activate its greatest lever to enhance worldwide climate protection and fully implement the Paris Agreement.

Federal Popular Initiative 'For a sustainable and future-oriented Swiss financial centre (Financial Centre Initiative)’

The initiative aims for:

• the environmentally sustainable orientation of the financial centre, with financial market players aligning their business activities abroad with international climate and environmental goals. Consideration is being given to binding transition plans to be implemented by the companies concerned.
• a prohibition on the funding or underwriting of new fossil fuel extraction projects or the expansion of existing ones.

Alliance Sud supports the initiative because:

• Switzerland is not sufficiently implementing the Paris Climate Agreement through self-regulation by the financial sector.
• the financial centre bears the greatest climate responsibility of all players under Swiss influence. It represents Switzerland's most important lever for helping to achieve worldwide climate protection.