The financial sector remains primarily focused on maximizing profits.

This December is shaping up to be the month of "green" finance. This theme was at the heart of Building Bridges in Geneva, a major event that last week brought together speakers from all corners of the globe. The 2024 edition was held in a particularly complex context, as green finance is not very much in favor these days. Behind the fine words, actions sometimes appear less glorious.

After a decline in sustainable investments observed in the United States earlier this year, Switzerland is facing a similar slowdown. A research institute in finance based in Zug found that the growth of financial flows in favor of investment funds that adhere to environmental, social and governance (ESG) criteria is currently no longer sufficient to catch up with that of traditional funds. During the autumn, the specialized platform Hazeltree also revealed that the world’s largest hedge funds preferred to bet against “green” technologies and sustainable development, while investing long term in fossil fuels.

Given the context, we thought it appropriate to question actors—small and large—of the financial sector about their relationship to sustainable investment. The responses of Katrin Wohlwend, head of sustainability communications at Banque Alternative Suisse.

What is your approach to so‑called green finance?

For nearly 30 years, Banque Alternative Suisse (BAS) has been dedicated to social and ecological sustainability across its entire business model. This means that sustainability is integrated not only into certain products, but into all our areas of activity. We apply strict exclusion criteria and promote nine specific domains to encourage this sustainability.

In our view, green or sustainable finance still focuses too exclusively on individual products, neglecting business models. In our sustainability analyses of companies and banks, we assess, for example, the share of turnover and revenue generated by sustainable offerings. That is, insofar as this information is available.

If one relies on pure “voluntarism,” only actors who are intrinsically motivated will react, which is probably a minority. A voluntary renunciation of a “legal” return runs counter to the logic of the free market.

What is your reaction when you hear that a large majority of hedge funds prefer to short their positions in renewable energies in favor of fossil fuels?

Since the bank’s founding, we have excluded investments in companies in the fossil fuel sector as well as those that grant them credit. We hope that all other actors in the financial sector will adopt the same attitude. In this logic, we signed the Fossil Fuel Non Proliferation Treaty Initiative, this campaign in favor of a treaty for the non‑proliferation of fossil fuels. The latter aims to stop, in a first step, new transactions between the financial world and companies active in fossil energies.

To nuance the point a little, it is important to emphasize that hedge funds represent only a part of the market. Broadening the question to all actors and products in the financial world yields a fortunately more nuanced picture. Not all banks concentrate on those funds speculating on polluting energy sources, far from it.

How should one adapt their investments in such an ambiguous reality?

We try, as far as possible, to avoid cooperating with actors who do not respect our exclusion criteria. This applies both to companies in our investment universe and to business partners, suppliers, etc. Banque Alternative Suisse places a strong focus on its international networks of values‑based banks, such as the Global Alliance for Banking on Values (GABV). We also cooperate with other banks that share our values, notably through equity stakes and the joint financing of sustainable projects.

This news raises a fundamental question: is the financial sector really ready to sacrifice part of its profitability for the good of the planet?

From our point of view, the financial sector remains primarily oriented toward profit maximization. A true orientation toward an economy of sufficiency and the self‑limitation that results from it remains rare.

For us as well, there is currently no sign indicating a fundamental change. It would be necessary for legislation, the public, as well as private and institutional clients to put pressure on these actors. If one relies on pure “voluntarism,” only actors who are intrinsically motivated will react, which is probably a minority. A voluntary renunciation of a “legal” return runs counter to the logic of the free market.

Nevertheless, a progressive integration of sustainability issues can be observed. Admittedly, this can sometimes lead to greenwashing. Although the speed and ambitions vary from one actor to another, real and serious efforts are being observed with a view to increased sustainability.

Too often, ESG measures focus on processes (management systems, policies, manufacturing processes) rather than on end products.

ESG criteria are increasingly struggling to convince—do we urgently need to establish new standards?

From our point of view, the major problems do not lie with the ESG criteria themselves, but with their application. Too often, the measures focus on processes (management systems, policies, manufacturing processes) rather than on end products.

For example, a manufacturer of combustion vehicles can score ESG points for sustainable production processes (such as reducing emissions during manufacturing), even if the final product remains harmful to the climate. It is also regrettable that companies in the fossil sector can improve their ESG scores through better governance or the implementation of social projects, while continuing to extract and sell fossil fuels.

Added to this is the question of transparency. It requires uniform standards for the application of ESG ratings. These standards are essential to allow investors to clearly understand the approach adopted by a company in terms of sustainability. At Banque Alternative Suisse, we pay particular attention to the impact of products, to transparency about how ESG ratings were obtained, and to the approach taken by the different suppliers of the companies assessed.

Finally, let us clarify that no evaluation, whether in terms of sustainability or ethical reflections, can do without criteria. There will probably always be negotiations about which criteria to use, their weighting, etc. In our sustainability assessment, we prefer to focus on end products and first ask whether the product is “desirable” from a sustainability point of view, while acknowledging the complexity of such assessments.

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