ESG, a strategic area of focus for the Bank

Entitled “Strengthen our ESG positioning”, this area aims to affirm BCF’s role in sustainability through the following commitment: “We will strengthen our ESG positioning and rigorously manage the risks directly or indirectly linked to it.”

Two ESG ambassadors have been appointed to ensure the implementation and scope of this commitment. They have the following tasks:
– Give concrete visibility to this strategic area;
– Ensure its integration at all levels of the organisation;
– Highlight its importance and cross-functional impact on all the Bank’s decisions.

The first ambassador is François Briguet, Head of ESG and member of the extended Executive Board. He coordinates the cross-functional ESG working group and oversees the implementation of ESG initiatives throughout the institution.

The second ambassador is Maître Christophe Mettler, Head of Legal, Risk and Compliance, and member of the Executive Board. He is the main sponsor for regulatory issues, the Sustainability Policy and the monitoring of ESG commitments. He also oversees the assessment and overall management of risks, including those specifically related to ESG issues.

This strategic reinforcement is fully in line with the overall vision endorsed by the Board of Directors, on which Ms. Dominique Jordan has taken on the role of ESG advisor, consolidating the consistency of the approach at all levels of governance.

As mentioned in the Chairmen’s message, the BCF’s approach is based on a principle of pragmatism. Our ESG Action Plan has been developed in the following stages:
1. Identify strategic ESG challenges
2. Define long-term ESG goals
3. Implement related strategic initiatives

Strategic challenges

BCF has identified five priority challenges for its ESG strategy:
– Preventing greenwashing: avoid any misleading communication regarding ESG commitments, whether in the form of unverified claims, inconsistent internal practices or products falsely represented as sustainable.
– Improving transparency: provide clear, standards-compliant information to ensure access to funding from markets and institutional investors.
– Monitoring financial risks related to nature: implement stricter monitoring of the loan portfolio exposed to climate risks in accordance with the relevant regulatory framework.
– Managing transition risks: support the cantonal economy in its transformation by mitigating the risks associated with regulatory and technological developments related to the energy transition.
– Measuring the carbon footprint: obtain reliable, up-to-date data on CO2 emissions of the financed projects in order to better prioritise measures with a high environmental impact.

Strategic objectives

To address these challenges, BCF has set itself the following objectives:
– Combating greenwashing: adopt specific, measurable, achievable, realistic, time-bound (SMART) ESG commitments. Promote a consistent, fact-based approach at all levels of the Bank;
– Ensure access to finance: provide reliable information to investors in line with market requirements for sustainability;
– Manage physical risks effectively: integrate climate risk analysis into the credit process (checklists, mapping, stress testing) and implement appropriate preventive measures;
– Reduce transition risks: align asset portfolios with climate targets and regulatory requirements. Regularly check the credit policy and monitor risk exposures;
– Improve financing advice and data quality: strengthen customer support for energy transition, improve the collection of building data, promote the interoperability of internal and expert systems and use this data to guide action.

Strategic initiatives

Each of BCF’s ESG strategic initiatives is part of a rigorous approach, based on four pillars:
1. Define the action to be taken
2. Identify the targeted ESG risk
3. Establish control mechanisms to ensure traceability, transparency and documentation of actions taken
4. Implement a monitoring system to assess the effectiveness, scope and sustainability of the measures

This methodological framework should enable the consistent, measurable and sustainable implementation of ESG commitments.

Concrete actions

A number of concrete actions have been planned to further integrate ESG issues into lending activities:
– Extend ESG data collection to the entire existing loan portfolio
– Create a renovation guide to provide structured support to customers and advisors
– Analyse and implement a dedicated ESG data collection tool for SME loans
– Develop a standardised offering that includes ESG criteria, particularly in the context of public procurement
– Define measurable quantitative targets to be achieved by advisors

With regard to investment activities, the following measures will be implemented to integrate ESG aspects into asset management:
– Define clear and measurable quantitative targets for ESG integration advisors.

As part of its ESG strategy, BCF must consider specific risks that can have a significant impact on its reputation and financial performance. These risks can be grouped into three main categories:
– the risk of greenwashing, which relates to misleading information or statements that the Bank may issue in relation to ESG principles. This risk includes inadequate or non-applied internal practices, non-ESG products or shortcomings in the advisory process;
– physical risk, linked to the financial effects of climate change. These effects can be direct, for example, damage to property or a decline in productivity, or indirect, such as disruption to supply chains. Physical climate risks are classified as acute when they result from extreme events (droughts, floods, storms) and chronic events when they result from gradual changes (rising temperatures, landslides, flooding, etc;
– transition risk, associated with the Bank’s adaptation to a low-carbon economy. A poorly managed transition will have a negative impact on market, reputational, technological, political and legal risks.

The three ESG risks for BCF are integrated into the Bank’s overall risk management and are an integral part of the internal control function monitored by the Executive Board and the Board of Directors. The ESG risk level is currently classified as low to medium.

Risk of greenwashing

At BCF, the risk of greenwashing is currently considered to be low, despite the gradual tightening of the criteria imposed by ESG rating agencies. This increasing pressure brings with it the risk that companies may overstate their ESG efforts to achieve a better rating. BCF’s approach is rigorous and transparent, based on sound governance and clearly defined decision-making processes that ensure the involvement of all stakeholders responsible for implementing ESG measures.

Finally, the strengthening of the legal and regulatory framework (SBA Guidelines, Federal Act on Climate Protection Goals, Innovation and Strengthening Energy Security (CIA), Ordinance on Climate Disclosures) significantly reduces the risk of greenwashing. The differences are directly sanctioned by the rating agencies, which require transparent, quantified performance and impact indicators.

To date, BCF has been extremely cautious in its announcements, always ensuring that it has factual and quantifiable evidence before publication.

All measures announced in 2024 relate to ongoing or planned actions with a specific budget allocated. This ensures that only realistic and achievable commitments are communicated, avoiding any promises that cannot be kept.

Physical risk

Given the low inherent risk level, the Bank has not taken any specific measures as it stands. The situation is reviewed periodically. No measures are currently planned in the short term.

Transition risk

The Bank has complied with the two SBA Guidelines, which are binding on all SBA member banks. In formulating its investment and lending policies, it has secured the necessary basis for a positive impact on the market risk. Nevertheless, it must review its ambitions annually against the objectives laid down in its Sustainability Charter in order to measure the real impact of its actions.

The Bank must also anticipate changes in regulations and ESG best practices and document its actions in its sustainability and management reports, thereby providing maximum transparency for investors.

Other risks (market, corruption, money laundering, fraud, etc.) are an integral part of the Bank’s overall risk management and are not addressed in this report.

The new investment policy has been in force since 1 January 2024 and all customer ESG preferences have been collected since that date.

Aware that any change in corporate culture requires sustained commitment and long-term motivation, BCF has adopted a pragmatic approach to ensure that the actions taken have a tangible impact. For BCF, it is critical to give its employees a sense of purpose, so that they can provide advice that is informed and tailored to the specific needs of each customer. The aim is to support all stakeholders in the climate transition.

This process is supported by the Bank’s Board of Directors and Executive Board, who ensure that the necessary human and financial resources are made available. In addition, each advisor receives ongoing training to help them achieve the double materiality objectives.