Week 24: Swiss voters reject climate law
Week 24: Swiss voters reject climate law
In this issue: ▸ The climate law vote in Switzerland ▸ Earth is trapping ‘unprecedented’ amount of heat ▸ Why did ESG funds outperform S&P 500? ▸ And much more...
Dear all,
I hope everyone is well and ready for a new edition of ‘ESG on a Sunday’!
We are continuing our journey into the woods of “possible” in relation to the climate emergency. Yes, “possible” is probably the right word here.
Is it possible that we can make this transition to a more sustainable future with all the divisions and frictions we see between different geographies, socio-economic conditions and dependencies? With historical imbalances between North and South, between rich and poor.
Do we have a choice? Do we have the strength and courage to say yes to change, to embrace a renaissance of our current economic system into something new and different?
The answer to that question depends on who you ask, and probably also in what part of the world you ask the question.
The climate law vote in Switzerland
This week we’re providing a perspective from one of the richest countries in the world. A perspective that will tell you more about what this is all about than a thousand reports (or newsletters for that matter).
I have asked one of my colleagues, Thomas Henauer, to share his perspective on last week’s climate law vote in Switzerland. A unique vote in a unique country at a unique time in history. It was the world's first democratic vote on climate protection.
If the Swiss failed… well, you get the picture.
I will “pass the mic” to Thomas:
Last weekend the Swiss voters rejected the CO2 law by 51.6%. It was the world’s first democratic vote on climate protection. The main reason for the rejection was the fear that the cost of living for the middle class and in the rural regions would rise.
If Switzerland were to act alone, there would be little to no impact on climate change, as Switzerland is only responsible for less than one thousandth of global CO2 emissions.
Swiss law allows its citizens to call for a referendum on bills that were passed by parliament. To achieve this, one needs to acquire 50’000 signatures from Switzerland’s 5.5 million eligible voters.
The referendum against the CO2 law was initiated by the right-wing conservative party SVP together with various business associations from the automobile, real estate, and mineral oil industry. Astonishingly, members of the Swiss climate youth supported the referendum! The law did not go far enough for them.
The newly proposed CO2 law was meant to ensure that greenhouse gas emission in 2030 would have been half of the ones in 1990. 75% of this had to be compensated in Switzerland itself and 25% abroad.
The bill was not based on bans, but on combined financial incentives, investments in climate protection and technical advancements. Climate friendly behaviour could have been financially beneficial: Those who created little carbon emissions would have to pay less and those who created more pay an increased amount. The incentive taxes included a CO2 tax on oil, natural gas and flight tickets. If the law had passed, the petrol prices would have increased by CHF 0.05-0.12 per litre and flight ticket prices could have increased by CHF 120 per flight and person.
A third or a maximum of CHF 450 million of these CO2 taxes would have flowed into a climate fund, which would be used for the renovation of buildings and investments in climate friendly infrastructure. It would have also sponsored Swiss companies to introduce new technologies to market. The other 66% of the fund would be paid back to the people and the companies.
The opposing group’s argumentation proved successful, the new CO2 law would increase the cost for heating, driving, and flying and would therefore bear an above-average load on the income and saving of the middle class families. Especially those who live in the rural and peripheral regions, which are not well connected with the public transport system.
Another well received point was that, if Switzerland acted alone and become a sole frontrunner it would be of little use to the climate but would financially “harm” the economy and the population. Switzerland contributes less than one thousandth to global CO2 emissions.
For those parts of the climate youth which also voted against the law, the proposed measures were far too little.
The advocates of the proposed law were able to make the case that climate change would cause great damage, followed by high costs if no decisive action is taken against it. Further YES votes were won with the arguments that the law supports climate-friendly investments and that, thanks to the “polluter pays principle”, everyone who acts in a climate-friendly manner would benefit financially.
What is next?
After the rejection of the CO2 law, new ways must be found to align Switzerland with the Paris agreement.
Seven days after the rejection of the law, it is still difficult to predict where the journey leads us. However, it is obvious that the Swiss model of direct democracy does not allow any extreme proposals from the right or left political spectrum. The political forces have to come together to find a compromise that can persuade a majority of the Swiss voters.
There seems to be a broad agreement that something must be done against climate change. The voter’s wallet played a major role in the decision. Hence a solution needs to be found which is as cost-neutral as possible and rewards climate-conscious behaviour. This can be achieved, for example, by the CO2 levies replacing the value added tax (VAT). This means that the tax quota can be kept neutral.
Further, as an incentive, the development and use of climate friendly technologies shall be deducted from taxes.
Thank you so much for this input, Thomas.
Switzerland will find its way, it has to. But text above and the perspectives shared gives you a sense of how utterly hard and complex this transition of ours is.
Countries like Switzerland can afford this, in principle, but as Thomas rightly points out: “The main reason for the rejection was the fear that the cost of living for the middle class and in the rural regions would rise.” Full stop.
This is what the fight for the transition is all about. And this friction will be there for the next decade. A decade that will most likely determine our future. Or rather, our many futures.
Despite a collective sense of our global future, our global consciousness (if we can call it that) is more or less in our wallets.
IN OTHER NEWS…
Earth is trapping ‘unprecedented’ amount of heat
According to new research from Nasa and NOAA, the Earth is trapping nearly twice as much heat as it did in 2005. The scientists described it an “unprecedented” and “alarming” increase amid the climate crisis.
Maybe this could make the Swiss middle class reconsider their vote?
Why did ESG funds outperform S&P 500?
In early 2021, most ESG funds outperformed the S&P 500 and studies now debate why. What’s driving this trend?
ESG fund managers have said their focus on nontraditional risks led to portfolios of companies that proved resilient during the COVID-19 downturn. But one report says that ESG strategies “do not offer downside risk protection”.
Meanwhile, a NYU study found a positive relationship between ESG and corporate financial performance 58% of the time, while 21% had mixed results and 13% saw no impact.
The murky world of ESG metrics
Here’s a thrilling read that’s shedding some light on the murky world of ESG metrics.
Two years ago, researchers at the University of Chicago started collecting data to determine the real social and environmental credentials of companies in the S&P 500.
What they found? That companies generally received higher marks based not on performance, but rather the number of metrics they disclosed.
The real solar-panel price crisis hasn’t begun yet
The sun is not always shining in China, and the real solar-panel price crisis hasn’t begun yet: Averting climate change could turn on whether the industry can become less dependent on Xinjiang and still keep up supply of a vital raw material. Read more here.
The (not so) long view on the carbon transition
In light of the main theme in my newsletter the past weeks (i.e. just transition and rich vs poor), here’s a really good article which kind of supports all of the things I addressed. A highly recommended read.
UN climate talks hit a wall over tensions about finance
Finally, we end this newsletter with costs. Or let us put it this way: a sad discord.
Rich countries appear to have missed the annual climate aid target by a lot, $100bn to be exact. This creates mistrust among the 191 countries that signed the Paris Agreement. Read more here.
That’s all for now. Have a great week everyone!
Best regards, Sasja