Thousands of Luxembourg funds face growing pressure to adopt Swiss Climate Scores

Introduced by the Federal Council in June 2022, these scores were developed in collaboration with the industry to position Switzerland as a leader in credible climate transparency. The scores assess the Paris alignment of financial investments using six indicators: greenhouse gas emissions, exposure to fossil fuel activities, global warming potential, verified commitments to net zero, credible climate stewardship, and management to net-zero.

While many Luxembourg funds have not yet formally adopted these metrics, experts believe that doing so is crucial to maintaining market competitiveness. The Swiss government regards these indicators as best practice for establishing transparency on how investment products align with global climate goals. For Luxembourg-based funds seeking to attract Swiss investors, disclosing these climate scores is becoming increasingly essential. As such, the Swiss framework impacts as many as 5,600 Luxembourg-domiciled funds distributed to Switzerland.

“As considering investor’s sustainability preferences becomes a common practice in the fund selection processes of many wealth managers and banks, the significance of producing respective disclosures and metrics is ever growing. Given the growing trend towards sustainable investing, Luxembourg funds should consider adopting the Swiss Climate Scores as a strategic move to attract Swiss investors," said Mario Gloeckner, Head of Business Development, D-A-CH-I-LI at FE fundinfo.

"Major Swiss banks and distributors are directly ingesting the Swiss Climate Scores to their database to accommodate the information within their fund centres and selection processes. Producing and disclosing these scores is therefore a key requisite for Luxembourgish funds to maintain their competitiveness in the Swiss market" said Mario Gloeckner.

By adopting these scores, financial institutions contribute to a broader effort to mitigate climate risks and establish a more sustainable financial system. For Luxembourgish funds, aligning with Swiss climate scores is not just about meeting market expectations and in some way requirements; it also represents a proactive step toward advancing global sustainability goals and mitigating the long-term risks associated with climate change.

“Ultimately, the Swiss Climate Scores go beyond satisfying a market request and Swiss Council recommendation - it reflects a broader commitment to sustainability, transparency, and the collective global effort 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,” he said.

* PwC Global Fund Distribution Report 2024