Sustainable finance and the regulation of nature- related risk

The Swiss framework

Sustainable finance has moved within a decade from a niche of specialized investors to a field of regulation that affects every bank and asset manager. Switzerland chose a path that combines a limited number of binding rules with self-regulation and voluntary standards. The Federal Council adopted an action plan with fifteen measures for the years 2022 to 2025 on 16 December 2022.¹ The Ordinance on Climate Disclosures, in force since 1 January 2024, requires public companies, banks and insurers with at least 500 employees and either total assets of CHF 20 million or turnover of more than CHF 40 million to report on climate matters along the recommendations of the Task Force on Climate-related Financial Disclosures. The first reports covered the financial year 2024. On 25 June 2025 the Federal Council decided to pause the planned revision of this ordinance in order to examine pragmatic amendments and to follow developments in the European Union.²

Against greenwashing the Federal Council relied first on the financial industry. It acknowledged the new self-regulatory provisions of the sector on 19 June 2024, while the Federal Department of Finance continued to examine state-level safeguards against misleading sustainability claims.³ The Swiss Climate Scores, introduced as a voluntary framework in 2022 and updated by a Federal Council decision of 8 December 2023 with effect from 1 January 2025, show investors how financial products are aligned with the goal of net zero emissions by 2050. The updated version requires the disclosure of exposure to renewable energy alongside exposure to fossil fuels and allows institutions to state and justify whether a product is climate-aligned.⁴ Recommended by the Federal Council to Swiss financial institutions, the scores have become a reference point for product disclosure in the domestic market.

FINMA Circular 2026/1

The most significant binding rule for banks is FINMA Circular 2026/1 on naturerelated financial risks, published in December 2024. It requires banks and insurers to identify, assess, manage and report the financial risks arising from climate change and from other nature-related risks, such as the loss of biodiversity. FINMA applies the principle of proportionality, with higher expectations for large and complex institutions. The circular entered into force on 1 January 2026 for climate-related risks. Institutions of supervisory categories 3 to 5, which include most banks with offices in Ticino, benefit from an additional year and apply the climate provisions from 1 January 2027. From 1 January 2028 the circular covers all nature-related financial risks.⁵

For a small Lugano private bank, the circular means that the board and management must integrate climate and nature risks into their risk governance, assess the materiality of these risks for their credit and investment portfolios and document the assessment. For the mortgage book of a domestic bank, physical risks such as floods, landslides and heat waves in Alpine valleys are relevant, and Ticino's exposure to such events is not negligible. For a private bank, transition risks in client portfolios and reputational risks from investments in controversial sectors are more important. The costs of implementation are mostly fixed costs of methodology, data and reporting, which weigh more heavily on small institutions. Like the other regulatory developments described in this chapter, the circular therefore favours larger units and adds to the pressure for consolidation.

Notes

1. State Secretariat for International Finance (SIF), "Sustainable finance", https://www.sif.admin.ch/sif/en/home/finanzmarktpolitik/sustainable-finance.html. ↩
2. SIF, "Sustainable finance" (above). The ordinance is the Verordnung über die Berichterstattung über Klimabelange (Ordinance on Climate Disclosures) of 23 November 2022, SR 221.434, https://www.fedlex.admin.ch/filestore/fedlex.data.admin.ch/eli/cc/2022/747/20240101/de/pdf-a/ fedlex-data-admin-ch-eli-cc-2022-747-20240101-de-pdf-a.pdf (status of 1 January 2024). SIF: "At its meeting on 25 June 2025, the Federal Council decided to pause the revision of the ordinance on climate disclosures for companies." ↩
3. SIF, "Sustainable finance" (above). ↩
4. SECO / Federal Council, "Federal Council decides on further development of Swiss Climate Scores", 8 December 2023, https://www.seco.admin.ch/seco/en/home/seco/nsb-news.msg-id-99293.html. ↩
5. FINMA, "FINMA publishes new 'Nature-related financial risks' circular", December 2024, https://www.finma.ch/en/news/2024/12/20241207-mm-rs-2026-01-naturbezogene-finanzrisiken/. ↩

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 August 2025.