FE fundinfo, a global provider of investment fund data, research and technology solutions, has warned that as investor demand for sustainable investments grows, up to 5,600 Luxembourg-based funds distributed in Switzerland could face significant headwinds. In a report on Thursday 3 October 2024, FE fundinfo highlighted that these potential impacts are linked to the increasing adoption of the Swiss climate scores, a framework gaining traction within the Swiss financial sector.

Introduced by the Swiss Federal Council in June 2022, the Swiss climate scores were developed in collaboration with the financial industry to enhance transparency and align investments with climate goals. The scores evaluate investments using six key indicators: greenhouse gas emissions, involvement in fossil fuel activities, global warming potential, verified commitments to achieving net zero, credible climate stewardship and management efforts towards net zero.

Many Luxembourg-domiciled funds have not yet incorporated these metrics, a move that industry experts believe could undermine their competitiveness. As the Swiss government has positioned these indicators as best practice for transparency, funds distributed in Switzerland are increasingly expected to disclose climate-related data. This expectation applies particularly to Luxembourg-based funds, which are under pressure to align with these sustainability metrics if they wish to attract Swiss investors.

Mario Gloeckner, head of business development at FE fundinfo for Austria, Germany, Italy, Liechtenstein and Switzerland, stressed the importance of adopting these scores in the report. He stated that as wealth managers and banks increasingly consider investors’ sustainability preferences in their fund selection processes, the need for detailed climate disclosures becomes more pressing. He explained that major Swiss banks and distributors have already begun integrating the Swiss climate scores into their databases, which enables more climate-conscious fund selection processes. According to Gloeckner, producing and disclosing these scores is crucial for Luxembourg funds to maintain their competitive edge in Switzerland. By adopting the Swiss climate scores, financial institutions would not only respond to market demands but also contribute to broader global efforts to mitigate climate risks.

Gloeckner further highlighted that embracing these climate metrics was more than merely meeting a market requirement. It reflected a long-term commitment to sustainability and transparency, aligning with international efforts to combat climate change. “Luxembourgish funds distributed in Switzerland that embrace this initiative not only strengthen their market position but also play a crucial role in fostering a greener, more sustainable future for the financial sector and society at large,” Gloeckner concluded.