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Meetup Review: The Risks Of Non-Compliance With Climate Finance

Meetup Review: The Risks of Non-Compliance with Climate Finance

Click here for MME’s Whitepaper: ESG Legal Risk Management: Finanzielle Klimarisiken und Verantwortlichkeit.

I feel the heat as a lawyer. Others don’t feel it yet, but it’s a volcano – and it’s burning. – Martin Eckert

On the 4 April, our Meetup on the legal situation of ESG-risk assessment in financial investments took place, organized jointly with foraus and MME. The presentation given by Dr Martin Eckert from MME was met with lively interest from the audience and has the potential to resonate widely in the Swiss financial market. MME are known internationally for their pioneering role in the field of blockchain. Among other things, they made the ICO for Ethereum possible, one of the world’s leading blockchain technologies. Their success in this field is a testament to their ability to recognize new trends and their motivation to take a leading role in driving change. This bodes well for the future of sustainable finance, for this is exactly the new goal MME have set themselves: to be pioneers and changemakers in Switzerland on the topic of ESG- and climate-related financial regulation. With their presentation at this Meetup, MME have set the first milestone on this path. They are one of the first Swiss legal firms to put their weight behind the cause of sustainable finance and to declare that current Swiss regulation on fiduciary duty already includes ESG criteria in risk assessment obligations.

Rebekka Thur from Sustainable FinTech starting off the Meetup and introducing the organisers.

Dr Eckert’s presentation, which is the product of a new dedicated team at MME, laid out the current regulations in Switzerland and the EU concerning fiduciary duty and how it relates to ESG risks. Much has been happening in the field over the last few years and a variety of voluntary sustainability initiatives have paved the way for broader and more systematic future regulation. Peter Ackermann, MME legal counsel, compared the current situation to the proverbial tip of the iceberg and remarked: while regulation on many ESG aspects may still be wildly insufficient and new unknown risks are lurking below the surface, the crucial point of the metaphor is that we can see the tip of that iceberg. And in the case of ESG risks, that tip is big enough to mandate that we start acting. There is enough knowledge, regulation and momentum behind sustainable finance at this time already to start the transition.

Martin Eckert presenting the current legal situation concerning ESG financial risks.

The immediate hurdle however is a lack of awareness. Asked by an audience member about the needs of MME’s clients concerning sustainable finance, Dr Eckert’s answer was surprisingly short: so far, many clients have given no consideration whatsoever to the implications of compliance with ESG-criteria in fiduciary duty. This despite Dr Eckert’s firm declaration that “ESG belongs on the agenda of almost every board” already today. But MME’s commitment to change this national complacency has the potential to wake up the market. Eckert: “I feel the heat as a lawyer. Others don’t feel it yet, but it’s a volcano – and it’s burning.” In discussion with the audience, a consensus on the role of regulators also became clear. Clients require official standards to know whether or not they are compliant. As Mr Ackermann put it: “Switzerland needs to lead the way and regulators need to take the first step.”

It is often argued that Switzerland is increasingly lagging behind in the international financial landscape in the transition to a sustainable global economy. As climate change deniers are losing their last shred of credibility in the international community, financial markets are being recognized as a major leverage for sustainability. Consideration of climate and ESG risks is no longer a fashionable option, it is a mandatory financial consideration if Swiss investors don’t want to find themselves sitting on billions of stranded assets in a few years’ time.

The involvement of MME in the Swiss blockchain scene helped position Switzerland as a global leader in the world of cryptocurrencies. With MME’s determination to do for sustainable finance what they did for the blockchain scene, we are seeing the beginning of a shift. With some work, Switzerland will be able to regain its footing in the topic of sustainability – a former area of expertise – and has the potential to become an international leader on ESG topics.

MME are one of the first Swiss law firms to explicitly state that climate risks are financial risks and therefore part of fiduciary duty.

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