The Swiss National Bank (SNB) so far has managed to keep politics out of its investment policy – the way it uses its resources is to be dictated by needs of monetary policy and not climate policy, was the overriding message. But the lower house of parliament this week will pass a motion that makes this line a great deal more fragile.

The government in May had indicated its acceptance of the motion and suggested that it would welcome a report on the effects of climate change on monetary policy and financial stability and the options for taking sustainability goals into consideration for the investment policy of the bank. With this position the government paved the way for a more political influence on the SNB, having always been staunch defender of keeping politics out of monetary matters.

Is Passive Investing Good Enough in Our Times?

The SNB in recent years has bought foreign currency for hundreds of billions of francs to prevent the franc from rising further and to protect industrial firms in Switzerland. The bank invested the foreign currency in equities and other securities and built a portfolio worth about 800 billion francs, making it one of the world's biggest institutional investors.

Throughout its policy of currency market interventions, the SNB maintained a passive investment strategy. It is not making any selection of titles because it doesn't want to make industrial policy. And thus it has acquired major stakes in firms such as Boeing and Raytheon, which both are big weapons manufacturers, as Swiss business paper «Handelszeitung» reported.

The only exceptions the bank makes are for companies that make banned weapons, violate human rights to a significant degree or systematically harm the environment.

Under the Guidance of Sustainability

The restrictions may be minimal, but they also serve as a point of entry for demands that go far beyond the current exceptions: if the bank can exclude investment in such companies, why should it not be able to do the same with firms that harm the environment in other ways?

The developments at the SNB can be seen in the same vein as the ones that have the private sector in their embrace. Today, hardly a bank can do without sustainable investment criteria, not least because the general public is asking for it.

Global Activity

The SNB is keen to be seen as a steady investor that takes the long-term view. It only became member of the Network for Greening of the Financial System last year, one of the last central banks to do so. The network wants its member banks to promote a sustainable policy – the SNB meanwhile is still invested in firms such as Shell, BP, ExxonMobil and Chevron.

In December of 2019, Andréa Maechler, one of the directors of the SNB and responsible of its investment policy, emphasized that the bank didn't do climate policy, which was the prerogativ of the government. Before the general election of the autumn of 2019, parliament voted down a bid by the Green Party that aimed to get the SNB to dedicate itself to the criteria of sustainability.

Opposition to Politicization Remains

With the green landslide, the situation has changed. The decision by the government to support the parliamentary motion and the compilation of a report on sustainable investments, the first step toward a greener policy may have come. Still, the opposition remains formidable, with 11 (out of 25) commission members opposing the motion.

But the supporters of a greener investment policy are not the only ones to plan tighter rules for the SNB. Alfred Heer of the right-wing People's Party proposes to shift all the interest the bank makes on cash holdings to the state pension fund. His motion is also slated to be voted on in the current parliamentary session. A further move has been made by the trade union federation (SGB), which is hoping to get more of the bank's surplus (or profit) for Switzerland's pension system.