Oil, gas and arms: what Swiss banks’ sustainable funds actually hold

Buying a sustainable investment fund from a Swiss bank does not automatically mean keeping your money out of fossil fuels. A review by the Swiss consumer protection organisation Konsumentenschutz has found companies linked to the sector in almost all the sustainable funds it examined at Switzerland’s biggest banks. Holdings include oil and gas producers such as Shell and TotalEnergies, as well as suppliers. For investors, the findings raise a question: how closely does a fund’s sustainability promise match its investments?

The review highlights a distinction when choosing a fund. An investment product can take sustainability criteria into account without holding only companies with environmentally friendly business models. Savers who want to avoid oil, gas or coal cannot therefore rely on a product’s name alone.

The scrutiny extends beyond oil producers

Konsumentenschutz names Shell and TotalEnergies as examples of companies held by the funds examined. Both produce oil and natural gas. Its criticism also covers businesses supplying essential technology to the fossil fuel industry. It cites Siemens, whose products include gas turbines and digitalisation solutions. Arms companies also feature in the funds.

The review therefore covers different kinds of commercial relationships. An oil producer’s connection to fossil fuels differs from that of a diversified industrial business supplying technology to the sector alongside its other activities. That distinction matters: it shows how far restrictions would have to reach if a fund were to exclude the fossil fuel supply chain as well as producers.

PostFinance’s Global Climate Equity fund is singled out. It holds 47 companies that Konsumentenschutz objects to. PostFinance has not yet provided a response to the criticism, leaving open how it justifies those individual holdings within the fund’s investment strategy.

The number of companies alone does not, however, establish how much of the fund’s assets is invested in them. A small holding carries a different weight in a portfolio from a large one. Nor does the figure reveal what proportion of a diversified company’s business involves fossil fuels. Those measures also matter when assessing an individual fund.

Sustainability does not necessarily mean exclusion

Sustainable investment can involve several approaches. Some funds exclude particular industries or business activities. Others use environmental, social and governance criteria when selecting investments and deciding how much to allocate to them. Others aim to support companies as they change their business models. These approaches do not necessarily produce the same portfolios.

A fund might, for instance, compare companies within an industry rather than exclude that industry altogether. Shares from a controversial sector can consequently remain in its portfolio. That is different from an investment product which avoids fossil fuels outright. Customers need to know which approach actually governs their fund.

Buying shares through a fund is also not automatically equivalent to directly financing a new oil or gas project. Funds generally buy shares on stock exchanges from other market participants. Nevertheless, their investors gain an economic interest in the companies concerned. Anyone seeking to avoid that involvement on environmental grounds needs clear investment selection rules.

The presence of a particular holding does not, by itself, establish that a fund has broken its own rules. It may, however, reveal that those rules do not meet customers’ expectations. That is why understandable product information, which investors can check against actual holdings, is important.

Consumer organisation demands tougher standards

Konsumentenschutz is calling on banks to show greater commitment and transparency. Its managing director, Sara Stalder, says: “Banks must take more responsibility for a sustainable future and finally apply appropriate, strict and transparent criteria to sustainable funds.”

The demand concerns not just how products are presented, but what they contain. Transparency alone does not make a fund more environmentally friendly. It does, however, allow customers to see which activities are excluded, what exceptions apply and how companies are selected. Stricter criteria could also change the composition of portfolios.

For Switzerland’s financial sector, the issue is the credibility of products explicitly associated with sustainability. Banks need to be able to explain why a particular company belongs in such a fund. The more strongly a fund’s name suggests a focus on climate, the more important it becomes to demonstrate a clear connection between that promise and its investment strategy.

What investors can check before buying

For savers in Switzerland, the findings underline the value of reading a fund’s investment policy and list of holdings before committing money. The key questions are whether fossil fuels are explicitly excluded, whether revenue thresholds apply and whether restrictions extend to suppliers. How the fund treats arms companies is equally relevant.

Those details help distinguish a fund that considers sustainability factors from one that excludes activities an investor does not wish to support. The distinction matters for customers trying to align their savings with their environmental priorities: a sustainability label alone does not establish where those boundaries lie.

PostFinance’s response to the specific criticism remains outstanding. Beyond that, Konsumentenschutz’s broader demand is unresolved: sustainable funds should invest using stricter, appropriate and transparent criteria. For customers, the benefit would be a clearer basis for deciding whether a fund puts their money to work in ways that match their own expectations.