Relevance of the topic to SZKB and objectives
Investment decisions (e.g. investments or exclusions) can cause positive or negative environmental and social impacts. For example, climate change, regulatory changes or societal developments can affect the risk or return of an investment and thus have a direct impact on SZKB. In addition, investors are also affected by such effects on returns. Opportunities and risks relating to responsible investing can be divided into an inside-out perspective and an outside-in perspective:

• Inside-out – the impact of investment business on the environment and society: SZKB investment business can have environmental and social impacts. Investments may finance companies that implement measures relating to sustainable CO₂ reduction, for example. At the same time, there is a risk that problematic activities may be supported by investments in certain sectors. Positive effects include the fostering of innovation and the creation of jobs, while negative effects may include undesired CO₂ emissions. The investment business enables clients to systematically accumulate assets and thus increase private pensions, among other things.
• Outside-in – the impact of ESG factors on investment business: External ESG factors such as climate change, resource scarcity or regulatory requirements directly affect SZKB’s investment business. These factors can alter the risks and return opportunities on investments, affecting both SZKB and its investors. 

"Sustainable products and services" and "climate change" are key topics for SZKB in the area of responsible investments ¹.

SZKB has defined the following targets in the area of responsible investment (for climate targets see Chapter 5 Climate Report):

• Consideration of controversial and/or environmentally harmful sectors in the investment decision-making process.
• Development of further investment products that foster sustainable behaviour and thus correspond to various ESG preferences.
• Development of an engagement policy by 2025.

After the financing business, the investment business is SZKB’s second-largest segment.

¹ _{The key topic of "climate change" is covered in Chapter 5 Climate Report and is not addressed in this chapter.}

Management approach

Asset management and investment advice
As part of its asset management and investment advisory services, SZKB ensures that clients receive the right investment solutions. The investment horizon, risk tolerance, investment objectives and ESG preferences are recorded individually and taken into account in the investment recommendations. For all investment clients, ongoing checks are carried out in order to ensure that existing investments comply with the defined ESG preferences. Any discrepancies are identified and discussed with clients in order to ensure that they meet individual needs. No investor profiling and thus no review is carried out for execution-only clients who decide without any advice.

Bank-wide processes and guidelines
Bank-wide processes, responsibilities and framework conditions are defined in internal requirements such as directives. The SZKB Investment Committee, which sets tactical asset allocations for various risk profiles on a monthly basis, is headed by a member of the Executive Board. The financial instruments for managed portfolios are selected according to clearly defined due diligence criteria, as set out in the directive "Investment Process in Asset Management and SZKB Fund Management".

Recording of ESG preferences
In order to record ESG preferences, SZKB has established a process in which clients are classified either during the advisory consultation or on the basis of existing investments. Sustainability is fully integrated into the investment advisory process, supported by a tool that enables ESG preferences to be recorded directly during the advisory process. At SZKB, the following four classifications are used for ESG preferences:

• Classic (exclusion of ESG extreme risks)
• Aware (compliance with moderate sustainability criteria)
• Focused (compliance with comprehensive and strict sustainability criteria)
• Effective (achievement of a specific, measurable sustainable benefit)

SZKB issues its own an ESG rating for all securities based on the requirements set out in the internal document "ESG Rules", which operates as a sustainability policy. This set of rules defines, among other things, the process for creating and applying SZKB’s ESG ratings.

Application of exclusion criteria
As part of the investment advisory process, each transaction is checked (except in the case of execution-only clients) in order to establish whether the selected financial instrument corresponds to the respective client’s sustainability preferences. In addition, financial instruments that could pose significant financial or reputational risks (referred to as extreme risks) are excluded from the SZKB investment universe in a manner comparable to a blacklist.

Further development of specialist knowledge in the area of responsible investing
SZKB ensures that its employees have the necessary expertise in the area of sustainability. This is ensured through targeted training measures, such as online ESG learning provided throughout the Bank, which also covers ESG processes and products specific to SZKB, as well as a specialist course in sustainable finance developed and certified in cooperation with the Lucerne University of Applied Sciences and Arts for managers and employees in areas with strong ESG relevance (see Chapter 2.2.2 "Diversity and integration", section Training and education).

Key measures 

• Developing sustainable financial products
• Transparency in relation to SZKB investment funds
• Exercising shareholder voting rights
• Gold from fair trade

Overview of SZKB exclusion criteria

Developing sustainable financial products

As part of its reviews and analyses of selected products, product management reviews the range of investment opportunities that take ESG considerations into account at least once a year and expands the range if necessary.

• Ethical line: SZKB successfully implemented its inaugural ethical mandate solution for a client in 2009 and has been providing clients with a variety of financial instruments that take ESG considerations into account since 2010. Specifically, this ethical line is based on a combination of comprehensive exclusion criteria (negative selection), a best-in-class approach (positive selection) and traditional financial analysis. In addition, climate risks have been explicitly taken into account since 2024, and the range has been further refined accordingly. Solutions from the ethical line have the «Focused» SZKB ESG rating and comply with the relevant exclusion criteria.
• ESG line: in 2024, SZKB supplemented its product portfolio with two sustainable solutions, the investment fund «SZKB ESG strategy fund» and the asset management mandate «ESG core mandate». Both solutions have four risk classifications (income, balanced, growth, capital gain). With these global and diversified solutions, 10% of the bond component and 25% of the equity component are invested in global ESG topics (e.g. water, smart infrastructure, healthcare, climate transition). New solutions from the ethical line have the «Aware» SZKB ESG rating and comply with the relevant exclusion criteria.
• Effective third-party funds: SZKB uses third-party funds for clients with the «Effective» ESG preference. A careful review is carried out, and SZKB selects potential third-party providers from effective funds. These funds generate a specific, measurable sustainable benefit. By using third-party funds, SZKB can offer effective funds in all ESG areas.

Key figures in the investment sector

¹ _{This is a volume figure (AuM).}
² _{Data with different client preferences only available from 2024 onwards.}

Transparency in relation to SZKB investment funds

SZKB offers its clients product-independent reporting according to the metrics defined in the value proposition. These metrics vary depending on the ESG rating, and the scope and content of the respective reporting to clients differ accordingly. The reports are also different depending on the type of product (private banking, asset management or investment funds).

For example, SZKB publishes a transparency report concerning all risk considerations relating to the ethical line, which provides information concerning the sustainability aspects of the investment solution. It transparently discloses the companies/issuers in which the investment solution is invested as of the reporting date. SZKB also prepares a climate report with information on the fund’s environmental footprint. In this way, SZKB helps investors more effectively evaluate the ESG impact of their investments.

Exercising shareholder voting rights

Voting rights (proxy voting) are actively exercised for all SZKB Ethical Funds, taking into account ESG criteria based on the proposals of an independent voting rights advisor. The applied voting policy, the voting directives and the specific voting behaviour are published transparently on the SZKB website. Other forms of active ownership, such as engagement solutions, were reviewed in the reporting year. For the time being, it has been decided not to expand this aspect.

Gold from fair trade

As a global hub in the refining and trading of gold, Switzerland has a special role to play in this market. SZKB focusses on gold from fair trade. Since 2021, gold bars weighing between one and twenty grams have been sold exclusively with the Fairtrade seal of approval from the Max Havelaar Foundation (Switzerland).

SZKB purchases gold bars weighing 20 grams or more exclusively from Swiss banks. The banks have provided written assurance to SZKB that all bars delivered by them adhere to the relevant rules of the London Bullion Market Association (LBMA)¹ for proper delivery, also known as good delivery.

¹ _{The London Bullion Market Association (LBMA) is the leading trade association for the global over-the-counter trade in gold and silver. Its rules, in particular the "Responsible Sourcing Guidance", set standards for responsible procurement, transparency and sustainability within the supply chain in order to protect human rights and comply with environmental standards.}

Assessment of effectiveness

SZKB expanded its range of products to include the SZKB ESG strategy fund and the ESG core mandate while adding a selection of effective third-party funds to the product portfolio for private banking clients.

All employees received training in 2024 concerning the topic of ESG as well as specifically the ESG products and ESG processes at SZKB. Sustainability is integrated into SZKB processes, and employees have enhanced their understanding of ESG.

SZKB complies with its due diligence obligations and accepts its responsibility. It has clear ESG due diligence requirements within various processes and products, which must be examined and complied with.

SZKB considers the measures taken to be appropriate and effective.

Further development and next steps

SZKB has planned the following measures for 2025 and beyond:

• SZKB will make adjustments to processes and reporting with the implementation of the new requirements under the SBA and AMAS Sustainable Finance Self-regulation 2.0.
• Building an independent investment controlling system that ensures, among other things, monitoring of ESG investment risks.
• Developing other investment products that take ESG preferences into account.
• Assessing how biodiversity risks and data can be integrated into the investment process.