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2 June 2023

ESG in Switzerland - quo vadis?

ESG is an acronym for environmental, social and governance criteria, which have become major issues for companies and investors worldwide.


ESG, or Environmental, Social and Governance, is a concept aimed at integrating environmental, social and governance considerations to assess the sustainability and responsibility of a company's business practices. These are non-financial factors that investors and companies (at the level of their management bodies and, increasingly, their shareholders) take into account when formulating their development strategy and making business decisions:

  • Environmental factors generally include the definition of a company's climate policy, energy consumption, waste management, reduction of greenhouse gas emissions, conservation of natural resources, reduction of pollution, implementation of measures to combat climate change and/or to ensure respectful treatment of the world. In other words, these criteria enable us to assess the way in which a company manages its impact on the environment.
  • Social factors generally include the company's policy on human resources and employee working conditions, its management of relations with stakeholders (shareholders, suppliers, customers, local communities) and its commitment to ensuring diversity and inclusion within its workforce. These criteria allow us to evaluate the way a company manages its relations with its employees, its business partners and society in general.
  • Governance factors generally include a company's governance structure, the transparency of its activities, the independence of its board of directors, executive compensation, risk management, the implementation of accurate and reliable accounting methods and a monitoring policy. These criteria enable us to assess the way in which a company is run and managed, and whether it is subject to adequate supervision.

Companies are increasingly aware of their impact on the environment, the communities in which they operate and the way in which they are managed. ESG criteria provide a framework for assessing these non-financial aspects and integrating sustainability and social responsibility into economic decision-making. On the one hand, investors, consumers and regulators are paying increasing attention to companies that adopt sustainable and environmentally-friendly business practices; on the other, by integrating ESG criteria into their strategies, economic players hope not only to improve their reputation and long-term performance, but also to contribute to a more sustainable and equitable future for all.

As Switzerland strives to meet global standards, these rapidly accelerating commercial developments are accompanied by an equally astonishing expansion of the legislative agenda.

The legislative framework

In Switzerland, the cornerstone of the ESG approach is enshrined in art. 2, art. 73 and 95 para. 3 of the Swiss Federal Constitution of April 18, 1999, which expresses the principles of equal opportunity, sustainability and fair order as priority objectives of Swiss economic and social policy. However, the Constitution contains numerous other references to these principles. In agricultural policy, for example, the Confederation ensures that production meets the requirements of sustainable development and respects the environment and animals (art. 104 para. 1 Cst); in food safety, the Confederation creates the conditions for resource-conserving use of foodstuffs (art. 104a lit. e Cst); in foreign policy, the Confederation contributes to promoting respect for human rights and preserving natural resources (art. 54 para. 2 Cst).

In this framework, Swiss companies are encouraged to pay particular attention to environmental, social and governance considerations in their business decisions. And, with that aim, numerous laws now impose a number of duties, directly or indirectly, on Swiss companies.

1. Directly

a) Environmental factors:

  1. Non-financial issues

    Thus, (1°) if a Swiss company is in the public interest (art. 2 let. c of the Federal Act on the Licensing and Oversight of Auditors, AOA), i.e. it is open to the public (art. 727 al. 1 ch. 1 CO) or subject to financial market supervision (art. 3 of the Federal Act on the Swiss Financial Market Supervisory Authority, FINMASA), (2°) if it has, alone or in conjunction with other entities under its control, at least 500 full-time employees on average over two consecutive financial years, and (3°) if it exceeds, alone or in conjunction with other entities under its control and over two consecutive financial years, at least one of the following values: a balance sheet total of at least CHF 20 million or sales of at least CHF 40 million (art. 964a CO), it must draw up an annual report on non-financial issues - which cover environmental issues, including CO2 targets, social issues, personnel issues, respect for human rights and the fight against corruption (art. 964b CO) - and have it approved by the supreme management or administrative body and the body responsible for approving the annual financial statements (art. 964c CO). The report must be published electronically and remain publicly accessible for 10 years. The purpose of this obligation is to provide an understanding of the development of the business, the performance and the situation of the company concerned, as well as the impact of its activities on these matters.

    It should be noted that the treatment of environmental issues will be specified by an ordinance on mandatory climate disclosures, brought into force on 1 January 2024.
  2. Transparency for companies exploiting certain resources

    Similarly, (1°) if a Swiss company is subject to ordinary control (art. 727 CO) and (2°) if it is, either directly or through a company it controls, active in the exploration, prospecting, discovery, exploitation and extraction of minerals, petroleum or natural gas, or in the exploitation of primary forests, and (3°) if single or cumulative payments to public bodies in connection with these activities reach at least CHF 100,000 in a given financial year (art. 964f para. 2 CO), it must draw up an annual report on payments made to state bodies (art. 964d to 964h CO).
  3. Transparency for companies exploiting conflict minerals (3TG) or offering services or products that may involve child labor

    Furthermore, (1°) if a company whose head office, central administration or principal place of business is in Switzerland, (2°) releases for free circulation in Switzerland or processes in Switzerland ores or metals containing tin, tantalum, tungsten or gold from conflict zones or high-risk areas, or offers goods or services for which there is a well-founded suspicion of child labor (art. 964j CO), it must set up a supply chain management system (due diligence) (art. 964k CO) and draw up a report on the implementation of these duties of care (art. 964l CO, cf. also Ordinance on due diligence and transparency in relation to minerals and metals from conflict-affected areas and child labor, DDTrO).
  4. Transparency for financial institutions

    Banks and insurers must keep the public adequately informed about the risks they face. This includes the consequences of climate change, which can entail significant financial risks for financial institutions. In 2021, the Swiss Financial Market Supervisory Authority (FINMA) set out its specific disclosure requirements for climate-related financial risks in circulars.

    The largest banks and insurance companies must describe the main climate-related financial risks, their influence on business and risk strategy, and the impact on existing risk categories. They must also publish the risk management structures and processes used to identify, assess and address these risks, together with relevant quantitative information, including a description of the methodologies used. Finally, institutions must describe the main features of their governance structure with regard to climate-related financial risks. Information is also required on the assessment of risk materiality, and on the criteria and evaluation methods used for this purpose.
  5. Financial Services Act

    Asset managers have a responsibility to inform their customers about the general risks associated with the financial instruments offered, to carry out a suitability analysis of the services offered in relation to their customers' knowledge, financial situation and investment objectives with due diligence. These obligations are based on the Federal Act on Financial Services of June 15, 2018 (FinSA). Legal commentators believe that these obligations include the duty to inform customers of climate-related risks (the extent of which will depend on the customer's level of experience) and to take these risks into account when making investments. If these duties of information and diligence are breached, asset managers are liable for damages. However, the majority of legal doctrine does not yet impose a duty on asset managers to specifically investigate their clients' sustainable investment preferences.
  6. Federal Law on Climate and Innovation

    On June 18, 2023, the Swiss people will vote on the Federal Act on Climate Protection Goals, Innovation and Strengthening Energy Security. The project will enable Switzerland to gradually reduce its consumption of oil and natural gas. The aim is to achieve net-zero emission balance (climate neutrality) by 2050. The project includes measures to reduce energy consumption. People who replace their heating, whether gas, oil or electric, will receive financial relief. Companies investing in climate-friendly technologies will also receive support.

    If the act is passed, it will require all companies to have reduced their emissions to net zero by 2050 at the latest. To achieve this goal, companies and industries are encouraged to draw up roadmaps by 2029.

b) On social factors:

On July 1er 2020, the Federal Act on Gender Equality of March 24 1995 (GEA) was supplemented by a section aimed at accelerating the implementation of equal pay (based on art. 8 para. 3 Cst) within companies employing 100 or more employees, Thus, if a Swiss company has a workforce of at least 100 full-time employees at the start of a calendar year, it must carry out, every 4 years, an internal analysis of equal pay within the company (art. 13a GEA) and obtain a report from an independent body on the result of its analysis (art. 13d para. 1 GEA), inform the employees in writing of the result of the analysis (art. 13g GEA) as well as its shareholders if its shares are listed on the stock exchange (art. 13h GEA).

c) Governance measures

The new Swiss company law, came into force in part on January 1, 2021, and for the balance on January 1, 2023. Two aspects of this revised act directly concern the governance factors of the ESG concept: on the one hand, quotas in company management, and on the other, the fight against abusive remuneration.

  1. Gender equality

    Since January 1, 2021, Article 734f of the Swiss Code of Obligations (CO) has encouraged the representation of both genders on the boards and in the management of certain large companies. This provision applies to public limited companies listed on the stock exchange which exceed the values set out in Article 727 para. 1 no. 2 CO, i.e. which, over two successive financial years, exceed two of the following values: (a) balance sheet total: CHF 20 million; (b) sales: CHF 40 million; (c) headcount: 250 full-time jobs on an annual average. Other companies may stipulate in their articles of association that the above-mentioned article 734f of the Swiss Code of Obligations applies to them.

    According to this provision, if the representation of each gender does not reach a minimum of 30% on the Board of Directors and 20% on the Executive Board, the remuneration report of these companies must mention the reasons why the representation of each gender does not reach the minimum, as well as the measures taken to promote the less-represented gender.
  2. Abusive remuneration

    In 2013, the Swiss people adopted a popular initiative (the so-called "Minder initiative") with the aim of curbing perceived excesses in board and executive compensation (cf. Art. 95 para. 3 Cst). The Confederation gave effect to the initiative by way of regulation (cf. Ordinance against Excessive Remuneration in Listed Companies, or "ORAb", which entered into force on January 1, 2014) pending the adoption of the Swiss company law reform. The provisions of the ORAb have now mainly been incorporated, without substantial changes, into the Swiss Code of Obligations (see Articles 732 to 735d CO), although some provisions have been incorporated into other laws. These provisions have become the cornerstone of corporate governance for Swiss companies whose shares are listed on a Swiss or foreign stock exchange.

3. Indirectly

In October 2017, Switzerland ratified the Paris Agreement of December 12, 2015, and committed to reducing the use of fossil resources (coal, oil, gas) greenhouse gas emissions in line with the Paris Agreement's objectives i.e. halving CO2 emissions by 2030 compared to 1990 values. The Paris Agreement is a binding legal instrument for the States Parties, but does not confer rights or impose obligations directly on companies and/or individuals. Switzerland is striving to implement the commitments of this Agreement, in particular in the Federal Act on Climate Protection Goals, Innovation and Strengthening Energy Security, which will be put to a popular vote on 18 June 2023.

At its meeting on June 24, 2020, the Federal Council adopted a report (link here) and guidelines on sustainable development in the financial sector. The aim is to make Switzerland one of the world's leading centers for sustainable financial services. To this end, the Federal Council intends to develop the framework conditions in such a way as to improve the competitiveness of the Swiss financial center and enable the financial sector to make an effective contribution to sustainable development. The report examines in detail, with a focus on environmental aspects, thirteen measures concerning sustainability in the financial sector, some of which are also under discussion within the EU. The measures focus on transparency, investment activities, initial and further training, and risks.

Finally, since 2002, the "Swiss Code of Best Practice for Corporate Governance" (SCBC) published by the Swiss business federation "economiesuisse" has largely become a reference in the field of responsible business conduct. It was revised on November 22, 2022 to incorporate developments linked to the new law on public limited companies and the sustained development in the field of sustainability. The Code is non-binding; companies that decide to abide by it remain free to organize themselves as they see fit, but must explain in an appropriate manner why they deviate from one or other recommendation where applicable ("comply or explain" principle).

The following recommendations are particularly relevant to the subject of this blog:

  • art. 9.4 CSBP 2023: The Board of Directors is guided by the goal of sustainable corporate development;
  • art. 12.3 CSBP 2023: The Board of Directors shall ensure an appropriate diversity of its members;
  • art. 35.2 CSBP 2023: the remuneration of people in executive positions must include fixed and variable components, and be structured in such a way that the variable component depends to an adequate extent on individual performance but also on the company's sustainable success.

Non-binding support initiatives and actions

At the end of June 2022, the Swiss Confederation, in collaboration with the financial sector, drew up and published a set of indicators: the Swiss Climate Scores (link here). There are 6 of these indicators, based on recognized standards and intended to contribute to the comparability of financial investments:

  1. greenhouse gas emissions,
  2. exposure to fossil fuels,
  3. global warming potential,
  4. verified commitment to net zero
  5. credible climate dialogue,
  6. management in favor of net zero.

At the same time, Switzerland has seen a growing number of private-sector initiatives, particularly in the financial sector, to promote sustainable investment. Examples include :

  • the Swiss Sustainable Finance association (, - which published a report in 2022 on sustainable investments on the Swiss market (link here) - ;
  • the Ethos Foundation (, which brings together more than 230 tax-exempt Swiss pension funds and institutions, with the aim of promoting socially responsible investment and fostering a stable and prosperous socio-economic environment, or of
  • The Swiss Bankers' Association, which has been very active since 2020 in publishing a number of documents, has issued benchmark recommendations on sustainability for its members (link here). It has also drawn up binding guidelines on the integration of ESG preferences and ESG risks into investment advise and portfolio management (link here). In August 2021, in collaboration with the Boston Consulting Group (BCG), it carried out a study on Switzerland's climate-neutral investment and financing needs between now and 2050 (link here). Finally, in February 2022, it published a discussion paper on climate-efficient mortgages (link here).

There are also a number of sustainable finance labels and certifications that can be awarded to players wishing to be recognized as concerned by these issues, such as

  • the SRI label (an acronym for "Socially Responsible Investment") created in 2016 by the French Ministry of the Economy and Finance ( which distinguishes funds that invest in companies with responsible environmental, social and governance practices, in order to enable savers, as well as professional investors, to distinguish investment funds implementing a robust socially responsible investment methodology ;
  • B Corp certification (, which rewards companies that meet high standards of performance, accountability and transparency on a number of factors ranging from employee benefits and charitable giving to supply chain practices and raw materials; or
  • the CSR standard (acronym for "Corporate Social Responsibility"), issued by various organizations, one of the most recognized of which is the "ecovadis" platform (

Finally, there are more corporate initiatives, such as the Net Zero Lawyers Alliance (, which aims to mobilize business lawyers, law firms and the legal profession to accelerate the transition to "net zero", and Legal ESG, which brings together opinion leaders to address the business imperative of environmental, social and corporate governance in the legal profession (link here).

In conclusion, ESG has become a crucial issue for Swiss companies. It represents a means of meeting growing expectations in terms of social and environmental responsibility. On the one hand, it seems that companies that adopt sound ESG practices are better placed to manage operational and financial risks, as well as to increase their resilience in the face of market disruption. On the other hand, investors and consumers are increasingly aware of the environmental and social impact of their choices, and are looking for sustainable products and services. By adopting ESG practices, Swiss companies strengthen their reputation and brand image, and improve their long-term financial performance by attracting investors and customers who care about the environmental and social impact of their choices.

Your VISCHER team will be happy to answer your questions.

Author and contact person: Damien Conus

Categories: Banking & Finance, Corporate and commercial, Private Equity & Venture Capital, Environmental, Social and Governance (ESG)