Climate Change Risk for Swiss Economy Is Moderate, Maechler Says
Climate Change Risk for Swiss Economy Is Moderate, Maechler Says
(Bloomberg) --
The Swiss National Bank is taking the economic risks posed by climate change into account when assessing the health of the economy, and any policy response will depend on the nature of potential shocks to the financial system, Governing Board Member Andrea Maechler said.
“The overall threat posed by climate risks that are capable of affecting Switzerland’s economic and financial stability appears to be moderate at present,” Maechler said in a speech in Geneva on Thursday. “Given our country’s climate risk profile and the fact that the bulk of these risks is insured, a climate-related natural disaster is unlikely to threaten the stability of the entire banking system in Switzerland, even if some individual institutions could be affected.”
With large balance sheets, central banks have become de-facto asset managers and have faced calls to make investments environmentally friendly. It’s an approach promoted by the Network for Greening the Financial System, a self-described “coalition of the willing” of monetary authorities that was set up in late 2017.
The SNB has a portfolio of more than 700 billion francs ($709 billion) worth of foreign currencies, held in stocks and bonds. Much of that’s been accrued due to interventions to prevent the franc from appreciating.
Climate risks “can also amplify market fluctuations and affect the quality of interest-bearing investments,” Maechler said. “Ultimately, they could impact the risk/return profile of our assets and hence the strength of our balance sheet.”
The SNB has for several years refrained from investing in companies that make internationally condemned weapons, violate fundamental human rights or are responsible for severe environmental degradation. But it faces criticism from within Switzerland that that approach doesn’t go far enough.
Maechler indirectly responded to those critics, saying the SNB believed its policy was appropriate.
“More active management in the environmental field would severely limit our investment options,” she said. “A more targeted selection of our investments would increase concentration risk, which would compromise our neutrality in the markets and hinder the implementation of monetary policy.”
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jan Dahinten, Zoe Schneeweiss
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