SUSTAINABILITY IN FOCUS
Bank J. Safra Sarasin Performs Strongly
on Climate Alignment Test
As a pioneer in sustainable finance and asset management, Bank J. Safra Sarasin’s portfolios are performing strongly on climate metrics in key asset classes.
That’s according to the 2020 Paris Agreement Capital Transition Assessment (PACTA) alignment test. PACTA measures financial portfolios' alignment with various climate scenarios consistent with the Paris Agreement on climate change. The goal of the Paris Agreement is to limit global warming to 1.5 Degree Celsius below pre-industrial levels.
In the 2020 PACTA climate-alignment test, Bank J. Safra Sarasin’s portfolios demonstrated the lowest exposure to climate-relevant sectors in equities, and was in the lowest quartile for corporate bonds compared to peers.
Launched in 2018, PACTA compares what needs to happen in climate-relevant sectors in order to minimize global temperature rises. The test assesses financial institutions’ current exposure to climate-relevant sectors and high-carbon economic activities in their investment portfolios. The results affirm the Bank’s strong commitment to achieving the Paris Agreement and its sustainable investment approach. Furthermore, it demonstrates that J. Safra Sarasin Sustainable Asset Management is well positioned with its Climate Pledge of achieving carbon-neutral outcome in assets under management by 2035.
Bank J. Safra Sarasin’s results
Portfolio exposure to climate-relevant sectors:
Portfolio exposure to climate-relevant sectors:
- Listed Equity: Portfolios have 1.5% financial exposure, resulting in 21% CO2 exposure
- Corporate Bonds: Portfolios have 10% financial exposure, resulting in 40% CO2 exposure
- The scenario analysis considers current exposure to climate-relevant sectors and their future alignment with different transition scenarios. The results for the Bank reveal a technology mix in the PACTA sectors that was generally much lower than the Global Market Benchmark for both listed equities and corporate bonds.
- The peer comparison shows that the Bank has one of the lowest exposures to high-carbon economic activities for listed equities and a low exposure for corporate bonds.
- The climate stress testing analyses the potential impact of a low-carbon transition on portfolio values. The results indicate a positive value change of +3.96% for equities and a negative value change of -0.14% for corporate bonds by 2030. The overall value at risk would therefore be negligible in a climate transition of the investment portfolios.
- The results for J. Safra Sarasin Sustainable Asset Management’s Swiss real estate portfolio also show very strong alignment with an envisioned decarbonisation pathway to net zero in Switzerland, due to a high share of renewable energy of 85% in its portfolio.
Bank J. Safra Sarasin’s participation in PACTA plays an important part in its commitment to manage and disclose climate-related financial risks according to the Task Force for Climate-related Financial Risks (TCFD). It was among the first Swiss financial institutions to start reporting based on the TCFD framework. PACTA’s scenario analysis and stress testing are two relevant aspects of the TCFD component risk management, how the Bank identifies, assesses, and manages climate-related risks. The Bank has worked with several organisations promoting the industry-wide participation in PACTA 2020 in Switzerland and will consider participating again in the future.
Up to 3,000 institutions have already used the PACTA test with over 600 portfolios tested every month. A total of 179 Swiss financial institutions participated in PACTA 2020, which was sponsored by the Swiss Federal Office of Environment (FOEN) and State Secretariat for International Finance (SIF). Climate-relevant sectors - energy, fossil fuels, auto manufacturing, cement, steel, and aviation, with shipping soon to be added - contribute the largest share of global CO2 emissions. They need to decarbonise in order to be aligned with the Paris Agreement. The test results help financial institutions support climate action and mitigate climate-related risks in their investments.
As a pioneer in sustainable investing, we incorporate sustainability into every stage of the investment process and our investment strategies. In 2020, J. Safra Sarasin Sustainable Asset Management launched an ambitious Climate Pledge aiming for a carbon-neutral outcome by 2035, and in 2021 joined the Net-Zero Asset Managers Initiative. The Climate Pledge, along with other sustainability commitments, are important milestones towards achieving the Paris Agreement’s goal of substantially reducing global greenhouse gas emissions, in an effort to limit global warming to 1.5 degrees Celsius.