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  4. Sustainability Report
    1. Geschäftsbericht
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    3. Zwischenbericht
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  5. 5 Climate Report
    1. 2 Responsible business conduct
    2. 3 Responsible financing
    3. 4 Responsible investing
    4. Notes
  6. 5.3 Strategy
    1. 5.1 Introduction
    2. 5.2 Governance
    3. 5.4 Risk management
    4. 5.5 Key figures and targets

5.3 Strategy

Sustainability is at the core of Schwyzer Kantonalbank’s mission and purpose. This is derived, among other things, from the Schwyzer Kantonalbank Act, which states that SZKB must contribute to the balanced and sustainable development of the Canton. The SZKB sustainability strategy comprises all dimensions of E, S and G. Climate change is addressed and embedded in the Bank’s sustainability strategy by means of appropriate objectives and measures.

 

Climate change is a growing challenge for the financial sector. Climate risks or nature-dependent financial risks in general can affect credit portfolios and investments, while sustainable financing opens up new business opportunities. Regulatory requirements, increasing stakeholder expectations and long-term profitability make it necessary to integrate climate issues into the strategy. The SZKB sustainability strategy considers climate change to be of material significance and takes account of climate issues as well as other sustainability aspects.

 

SZKB recognizes climate change as a risk driver that impacts existing risk categories, including credit, market, liquidity, operational, and strategic risks. In accordance with the recommendations of the TCFD, SZKB distinguishes between physical climate risks and transition climate risks.  

Physical risks typically arise from climate-related acute events (e.g. natural disasters) or long-term changes (e.g. shifts in vegetation zones, snowfall boundaries, or permafrost thawing). Transition risks stem from political changes, such as regulatory interventions (e.g. carbon taxes or technology bans) or social changes (e.g. shifts in consumer behavior).

With the specific involvement of other internal employees, the Sustainability Office conducts an annual assessment of ESG risk drivers, which is reviewed by the Risk Management department and approved by the Sustainability Committee. The main ESG risk drivers are then allocated to the existing risk categories. As part of the annual risk assessments, these risk drivers are then incorporated into the risk assessment of the risk categories, ensuring that the drivers are taken into account. SZKB has identified ESG drivers in the area of the environment (including climate). In terms of physical risks, climate-related developments such as increased natural events are prominent. Transition risks are shaped in particular by regulatory adjustments, changing demand or technological developments. In addition, climate data availability and quality operate as drivers for the appropriate integration of climate-related aspects into internal processes.-

Climate-related risks

SZKB evaluates climate-related opportunities and risks over three distinct time horizons: short-term, medium-term, and long-term.

 

Short-term0 to 5 years
Medium-term5 to 10 years
Long-term10 to 30 years

 

SZKB is fundamentally exposed to physical and transition ESG risks across all risk categories. Natural events can increase credit and liquidity risks, while CO₂ regulations, technological change and rising social expectations can influence credit, liquidity, operational and strategic risks. In addition, there are transition-related challenges such as regulatory uncertainty and possible greenwashing risks in the operational area. Overall, however, SZKB considers the ESG risk drivers identified across all risk categories to be non-material and not to have any substantial impact on its risk situation.

SZKB expects physical risks to become increasingly significant over the long term as the effects of climate change become increasingly more apparent, with transition risks becoming less relevant.

Climate-related opportunities

SZKB has identified a number of potential climate-related opportunities arising from social change, new regulatory requirements and technological developments.

 

OpportunityDescription
New business areas and productsTackling climate change opens up a wide range of opportunities for SZKB to tap into new business areas and products. In particular, the development and offering of «green» loans, sustainable investment products and ESG funds offer the Bank an opportunity to generate additional sources of income. In the building sector, the potential will arise through the financing of building renovations and the replacement of fossil-fuel heating systems. These measures not only support the energy transition but also bolster SZKB’s position.
Energy efficiency and cost reductionInvestments in energy-efficient buildings, technologies and processes will enable SZKB to reduce its operating costs over the long term. The increasing use of renewable energy not only helps to cut costs but also raises environmental awareness within the workforce and underscores the Bank’s commitment to sustainable business.
Fostering sustainable entrepreneurshipSZKB sees further opportunities as we move towards sustainable production methods and processes. Companies will increasingly invest in sustainable innovations, such as recycling or other circular business models. SZKB is currently examining whether and to what extent targeted financing could be considered for projects or companies that potentially offer social or environmental benefits. Such measures have not yet been implemented, although in future they could strengthen the position of SZKB as a trusted partner for sustainable financing, thereby attracting new clients and consolidating existing client relationships. At the same time, financing according to social and environmental criteria makes an important contribution to social and ecological transformation.
As part of the risk inventory, a qualitative assessment of ESG risk drivers was carried out. The assessment is supplemented by scenario analyses and calculations for the risk category with the greatest exposure. Due to increased relevance, in 2023 and 2024 SZKB engaged more with credit risk in relation to clients and carried out a scenario analysis in the areas of mortgage business and corporate clients concerning the transition risk «carbon tax on client loans». The other risk categories were comparatively less affected, and as a result, no further scenario analyses were carried out. The results of the scenario analyses demonstrate that expected losses increase only marginally. The materiality of the scenarios must be classified in such a way that the realisation of the scenario would have a tangible effect on SZKB but would not pose an existential risk. As SZKB’s credit portfolio has not changed significantly, the same approach will also be applied for 2025. For assessments of long-term developments, initial tests were carried out using quantitative scenario analyses, although further analyses and clarifications will be carried out in future in order to validate these and increase their reliability.

SZKB recognises climate-related risks and opportunities as key drivers that affect both strategic orientation and financial planning. The targeted integration of sustainable approaches not only creates the potential to set the Bank apart from its competitors but also makes it possible to effectively reduce long-term risks and proactively address rising regulatory and social requirements.

In order to take climate-related risks into account systematically, SZKB is continuing to develop its risk management processes so as to capture and quantify these risks more precisely. This may require an increased creation of provisions as well as the consideration of prospective future market fluctuations and regulatory requirements in liquidity planning. At the same time, growth forecasts in the area of sustainable products are opening up promising prospects, which are actively integrated into strategic decision-making processes.