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The Swiss financial centre: leading the way on innovation and sustainability
With its long-held reputation for secure, stable and trustworthy banking, the Swiss financial centre is now becoming a global hub for innovation and the transition to sustainable finance. Speaking on Swiss Finance Day at the Covid-delayed Dubai Expo 2020, our Partner Holding Privé and Head of New Markets, Arnaud Leclercq, discussed how Swiss institutions must work together to make Swiss finance a centre of reference for sustainable investment.
Alongside a panel of notable leaders from industry and the Swiss Finance Ministry, in a wide-ranging debate on “The Swiss financial centre’s leading contribution to innovation and sustainability,” he spoke of the need for new tools for sustainable investing that both react to and encourage change.
Leading by example
Opening the debate, Swiss Finance Minister Ueli Maurer said, “The Swiss government considers sustainability to be an important building block for the financial sector. We want to reaffirm Switzerland’s leading position in sustainable finance, with a new climate label for financial products. This is for the good of the climate and for the good of Switzerland as a competitive business location.”
For Arnaud Leclercq, this is where the industry must lead by example. It starts, he said, with practising what you preach – one of the driving forces behind Lombard Odier’s upcoming move to its new headquarters in Bellevue is the improved sustainability credentials of the new office. However, becoming a reference point isn’t just about looking inwards, it’s also about seeking external expertise. “At Lombard Odier, we have formed a partnership with Oxford University to build a portfolio temperature alignment framework by working in collaboration with scientists, researchers and artificial intelligence experts at the university. This allows us to align client portfolios with the Paris Agreement. So on the one hand we aim to be a benchmark for the industry, positioning ourselves at the fore of what we do, but we also remain humble enough to seek outside expertise.”
Sustainability’s driving forces
Innovations like the Lombard Odier Portfolio Temperature Alignment framework are driving change, Leclercq told the audience at the Expo, but they are also a reaction to the market, providing investors with the information they are increasingly seeking for themselves. Alongside this investor demand, Leclercq outlined three other forces he saw as driving the move towards sustainability.
Firstly, policy and regulation – both incentive approaches, which include the innovative new climate-labelling scheme currently being developed by the Swiss government, and punitive approaches like higher taxation on polluting products. The second is consumer choice, as end users start to factor environmental impact into their everyday spending. The third is inflation. He said: “We have seen the price of commodities spiral, to the extent that this could accelerate a switch to sustainable choices. Consumers will probably change their cars and adapt their houses because it is becoming so expensive. They have to act, and now. It’s not just a slogan, it’s because they have bills to pay.”
Read more on Lombard Odier’s sustainable investing conviction
Regulating innovation with finance out in front
Beyond sustainability, the Swiss financial centre also has a leading role to play in innovation across industries, the debate heard, with a particular focus on the rise of blockchain technology and cryptocurrency. “In 2021 Switzerland became one of the first countries in the world to enact modern blockchain regulation,” said Ueli Maurer. The new law, he explained, was needed to foster innovation while managing risks, a front-footed approach that keeps Switzerland at the cutting edge of new technologies and industries.
Daniela Stoffel, Swiss State Secretary for Finance, reinforced the importance of encouraging innovation while maintaining core principles: “The stability of the financial market is paramount in whatever we do. Anti-money laundering rules, checks and balances will never be sacrificed. Yet we’re ready to push the limits to adapt, de-regulate, regulate in a different way.” For the Swiss financial centre, digital innovation could mean seismic change. “What if,” Stoffel asked, “technology takes over as guarantor for compliance with certain regulations? We’re ready to accept that current intermediaries might no longer be needed.”
While some industries might see disruptive new technologies as a threat, Marcel Rohner, head of the Swiss Bankers Association, saw it differently. “Competition,” he said, “is the ultimate driver of innovation. There are many industry associations that try to hinder competition, and to preserve what they have. We do not believe this is a good thing. The financial industry in Switzerland has always worked in highly competitive environments.” Highlighting how high tax and burdensome regulation can inhibit innovation he said, “we try to influence the legislative process, the regulatory process, so that it contributes to innovation.”
Here, dialogue and trust were key themes. Where some governments might not welcome such attempts to influence legislation, the Swiss government embraces it, valuing the industry’s expertise and ability to deliver. As Daniela Stoffel explained, the government’s approach is to let the industry take the lead: “This is part of our success story. It’s a constant exchange and discussion. We want the market to act within a framework that we set which puts it in an ideal position to be able to lead. We’re trying not to lead but to follow.” It’s an approach that’s bearing fruit, with the 2019 licensing of new fintech ventures having fostered the growth of the fintech venture market, and the 2021 regulations encouraging blockchain innovation.
Closing the debate, State Secretary Daniela Stoffel said, “It sounds like our recipe for success is going to be what it’s always been. We say ‘A’ and we mean ‘A’ and we do ‘A’. It has worked for many hundreds of years, and it’s going to work for the future. These basic principles will bring about another leading era for Swiss financial services.”
For Arnaud Leclercq the debate was an opportunity to highlight shared values of discipline, simplicity and efficiency, values that have been core to the Swiss financial centre’s strength for centuries. It was also a chance to look to an exciting future, as we work together to meet the challenge of climate change. As Leclercq said: “That of course will be an opportunity for investors, not only to do good, but also to see a return on their investment.”
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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