Is ESG worthwhile for investors?

ESG is becoming an increasingly prominent issue for private clients, and for younger ones in particular sustainable investing is essential. Even more attention will be focused on the issue from 1 January 2024, when the mandatory minimum investment standards of the Swiss Bankers Association come into effect.

The new guidance from the Bankers Association sees Switzerland bridge a major gap between its regulations and the European Union's directives. A glance at the Swiss Bankers Association guidance shows that the requirements in Switzerland are much more pragmatic than the EU's MiFID II. The guidance builds on the provisions of the Financial Services Act (FinSA), expanding it in terms of sustainability aspects. From the start of next year, clients must be informed about the ESG risks of the products offered to them. Clients' ESG preferences must also be identified as part of the appropriateness and suitability check and taken into consideration when providing investment advice and managing assets. Finally, relationship managers must be trained and kept up to date on ESG solutions.


Switzerland has already made great strides in this area. The market for sustainable investments has seen substantial growth in recent years. A study of the market by Swiss Sustainable Finance (SSF), which gathers data on funds and mandates from banks and asset managers, shows that the volume of sustainable investments has risen 30% to CHF 1,982.7 billion.

Range of investments

The term "sustainable investing" covers a large number of different approaches. A study by SSF shows that for asset managers, choosing exclusion criteria is the most popular. If a company or country does not comply with certain values, it can be excluded from the portfolio. This process is also known as negative screening. Negative criteria of this sort frequently include manufacturing or selling prohibited weapons.  Tobacco, pornography, alcohol, gambling and human rights abuses are also often on the negative list. These exclusion criteria make it possible to potentially reduce investment risk.


Asset managers' second-most frequently used investment approach concerns ESG ratings. This involves assessing whether a company is among the most sustainable firms in its industry. An investigation is carried out into whether the company is better than average in environmental, social and governance matters. If a company is one of the best in its sector, it counts as positively screened under the best-in-class approach. Positive screening has a range of advantages, but can also reduce the number of investment options.

Taking responsibility

As a subsidiary of Crédit Mutuel, Bank CIC (Switzerland) Ltd. is committed to sustainability as a major issue. Bank CIC has been using exclusion criteria and ESG ratings to manage its own pension fund for some time now, and from 2024 will also do so for client portfolios and investment recommendations. As an asset manager, it is our responsibility to offer portfolios that take account of the risks and opportunities associated with sustainable development and support the financing of new activities. Our approach aims to identify sustainability risks and opportunities within sectors and select companies that are helping to fight climate change.

We draw a distinction between elements the company already takes into account and those it intends to in future. Thus, our recommendations follow a best-in-class approach.


There are also clearly defined no-go areas for our portfolios. Clients will find no companies in our portfolios that manufacture prohibited weapons, market or produce genetically modified organisms (GMOs), are involved in child labour, coal mining, gambling or pornography or in general breach the UN Global Compact. By avoiding controversies in portfolios, we protect client assets against investments that present a reputational risk and may ultimately result in direct or indirect financial costs.

ESG is worth it

In our view, the answer to whether sustainable investing is worthwhile is a resounding "yes". Even though whether sustainable investments perform better depends very much on the time period you select, it is definitely true to say that companies with a high ESG rating are less volatile, which in turn has a positive impact on the volatility of the whole portfolio. In our view, over the long term sustainable companies enjoy benefits regardless of their region or sector and offer a correspondingly better risk/return profile.


In summary, it is fair to say that sustainability is an area which is developing extremely rapidly and becoming increasingly important for both asset managers and clients. Banks need to put sustainability into practice and refine and update their processes. Ultimately, portfolio performance will benefit in the long term. The developments under way are welcome and a step in the right direction, but we are only at the beginning.