Prudential supervision of climate risks

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Climate- and nature-related risks have entered prudential supervision. From 2021 FINMA required the large banks and insurers to disclose their climate-related financial risks, and it subsequently adopted a circular on the management of nature-related financial risks, applicable in stages from 2026. This circular requires institutions to identify, measure, manage and monitor these risks within their ordinary processes.¹ The Swiss National Bank has integrated climate risks into its financial stability analysis and into the management of its reserves, with limited exclusions.²

For Geneva institutions, these requirements make sustainability, beyond products and marketing, a matter of risk management, with consequences for lending, in particular trade finance and real estate, for investments and for capital. A bank that finances hydrocarbon flows must assess the transition risk weighing on its counterparties. A mortgage bank must assess the physical risks weighing on the properties it finances, while a manager must measure the exposure of its portfolios. These analyses require data, models and skills that the financial centre has had to acquire quickly.

Notes

FINMA, “La FINMA concrétise les obligations de transparence en matière de risques climatiques” (FINMA specifies transparency obligations on climate risks), press release of 31 May 2021, finma.ch: revision of Circulars 2016/1 and 2016/2 in force on 1 July 2021 for banks and insurers in categories 1 and 2; FINMA, “FINMA publishes new ‘Nature-related financial risks’ circular”, press release of 17 December 2024, finma.ch: Circular 2026/1 in force on 1 January 2026, with transitional periods until 2027 and 2028. ↩
Decision of the SNB of 17 December 2020 to exclude from its investments companies whose main activity is coal mining; Alliance climatique suisse (Swiss Climate Alliance), “Sortie de la BNS des mines de charbon : cette première étape minimale doit être suivie d’une intégration climatique complète” (The SNB’s exit from coal mining: this minimal first step must be followed by full climate integration), klima-allianz.ch (accessed September 2026). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.

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Dr Alexander Ressos, TEP

Rechtsanwalt/Attorney-at-Law

I am a Swiss attorney-at-law and also admitted as a solicitor in Hong Kong and in England & Wales, with almost 25 years of experience.

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Prudential supervision of climate risks

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