The volume of sustainable investments in private equity, infrastructure and mortgages conducted by Swiss asset managers and asset owners has increased last year, outpacing other asset classes, according to the Sustainable Market Study 2023 published by the association Swiss Sustainable Finance (SSF).

Last year, asset managers and asset owners invested CHF77bn (€78.6bn) in private equity according to sustainable standards, up from CHF74bn in 2021, and CHF35bn in infrastructure, up from CHF24bn the previous year. Sustainable investments through mortgages jumped from CHF2bn in 2021 to CHF14bn in 2022, according to the report.

“While most asset classes experienced declines due to negative overall market performance, private equity, infrastructure and mortgages experienced absolute increases. This illustrates a trend towards more sustainability-related investments in non-traditional asset classes,” Sabine Döbeli, SSF’s chief executive officer, told IPE.

Equities, corporate bonds, sovereign bonds, and real estate are still the top asset classes for sustainable investing in Switzerland, but their volume has declined year-on-year.

“What we see in the latest data is that sustainability-related investments are applied across practically all asset classes with equity, corporate bonds and sovereign bonds accounting for about three-quarters of total volumes,” Döbeli added.

Asset owners conduct green investments mostly in real estate (28%), corporate bonds (27%), and sovereign bonds (25%), according to the study, which also showed that 86% of asset owners said they have a formal ESG policy in place for real estate investments.

In 2022, the overall volume of sustainable investments in Switzerland declined by 19% to CHF1.61trn, including funds, mandates and self-managed assets of asset owners, from CHF1.98trn in 2021.

The reduction was the consequence of negative market performances, stricter definitions of sustainability-related investments in the country, and lower reported volumes for asset owner’s stewardship approaches due to methodology changes, the report explained.

Institutional investors remain the main group in terms of sustainable investment approaches with CHF1.17bn allocated in line with ESG standards.

The share of funds investing according to ESG criteria corresponded to about 52% of the entire Swiss funds market last year, on par with the previous year’s level, it added.

Thematic investment approaches (86%), and impact investing (80%) grew strongly last year among Swiss investors, while exclusion (-6%), ESG integration (-22%), and ESG engagement (-14%) lost ground.

The study has defined for the first time the climate alignment approach, referring to the reduction of greenhouse gas emissions in portfolios in line with global climate goals.

“In this year’s market study we for the first time collected data on the use of the climate-alignment approach. With CHF375bn, already almost a quarter of all sustainability-related investments in Switzerland follow the clear goal to reduce the carbon footprint of the portfolio to net zero by 2050,” Döbeli said.

This year’s report also splits investments into five categories based on the white paper published by the European Sustainable Investment Forum (Eurosif) Classification Scheme for Sustainable Investments.

The five categories are exclusion-focused investments, basic ESG considerations of risks and opportunities, advanced ESG, meaning a systematic analysis and integration of ESG factors, impact-aligned investments with a positive impact, and impact-generating investments actively contributing to a positive impact, the report said.

Exclusion-focused strategies make up 13% of the overall volume of green allocations at CHF216bn – CHF181bn for asset managers and CHF35bn for asset owners.

The basic ESG approach is followed by asset owners with investments totalling CHF246bn, and asset managers with CHF584bn. Advanced ESG investments account for 14% (CHF233bn) of all sustainable investments, CHF172bn attributable to asset managers, and CHF59.9bn to asset owners.

Impact-aligned investments make up 12% of the overall volume, or CHF195bn, CHF171bn conducted by asset managers and CHF24bn by asset owners. Impact-generating strategies represent the smallest share of sustainable investment with CHF136bn.

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