Bases of sustainable finance – Liechtenstein
The Parliament of the Principality of Liechtenstein approved the Paris Agreement on Climate Change, which replaced the Kyoto Protocol at the end of 2020, on 9 June 2017 (LGBl. 2017 No. 286). Under the Paris Agreement, Liechtenstein undertakes to reduce its emissions by 40% (instead of the previous 20%) by 2030 compared to 1990. The 17 Sustainable Development Goals (SDGs) are to be observed as strategic guidelines for Government action. In implementing the SDGs, the Government believes it is important to build partnerships with the private sector and civil society. This principle emerges from the first country report submitted to the UN for 2019, in which the Government identified eight SDGs (SGDs 4 to 7, 9 and 10, 12 and 13) for which it sees the greatest need for action in Liechtenstein. Four key projects were defined for this purpose: Education Strategy 2025, Energy Strategy 2030, Mobility Concept 2030, and measures to reconcile family and working life. Liechtenstein also supports the Green Climate Fund (GCF), which was established by the parties to the UN Framework Convention on Climate Change (UNFCCC).
The most important national instruments to implement the Paris Agreement are the CO2 Act, the Emissions Trading Act, and the Energy Strategy. Also in its Financial Centre Strategy published in February 2019, the Government attaches great importance to sustainability and the transition to a low-carbon economy, the financing of which requires an efficient financial market for climate-conscious investment decisions. On 3 March 2020, the Government decided that Liechtenstein will participate in the internationally coordinated Paris Agreement Capital Transition Assessment (PACTA 2020), which will assess the State's externally managed assets for climate compatibility. Liechtenstein's financial intermediaries (banks, asset managers, pension schemes, insurers, etc.) also have the opportunity to have their financial investments assessed free of charge, helping them to make a greater contribution to achieving the country's carbon-reduction goals.
Already at the beginning of 2009, the Government, together with the business associations of the Liechtenstein financial centre and the University of Liechtenstein, established the Life Climate Foundation, which provides ongoing information and draws attention to the importance of sustainability with various events and awards. In 2016, a report was published on the ESG analysis of Liechtenstein equity funds, showing that numerous Liechtenstein equity funds already fulfilled the ESG criteria to a high degree.
- Energy Strategy 2030
- Education Strategy 2025
- Mobility Concept 2030
- Financial Centre Strategy
- PACTA 2020
- Life Climate Foundation
- ESG Analysis of Liechtenstein Equity Funds
In the financial market, the following financial market participants and financial advisors are subject to sustainability-related disclosure covering the manufacture, distribution, and advice of financial products under Regulation (EU) 2019/2088: insurance undertakings, investment firms, banks, fund managers, institutions for occupational retirement provision, manufacturers of pension products, providers of pan-European personal pension products, and insurance intermediaries.
Undertakings subject to an obligation to publish non-financial information under Directive 2014/95/EU (NFRD) are also subject to sustainability-related disclosure under Article 8 of Regulation (EU) 2020/852.
Financial products cover portfolios managed in accordance with Article 4(1)(8) MiFID II, AIFs, UCITS, IBIPs, pension products, pension systems, and PEPPs.
Financial market participants in Liechtenstein already have or are in the process of creating a sustainability strategy that largely incorporates sustainability risks and sustainability factors into the business strategy or good governance. More and more financial market participants are committing themselves to the principles of the United Nations, relying on sustainable investment products, and complying with non-financial reporting rules. A growing trend towards more sustainable investing can be seen at all levels of the financial centre, including public-benefit foundations and trusts – a development that is now hardly imaginable otherwise, given the international and European requirements. Further details can be found on the websites of the business associations and financial intermediaries.
Financial Market Authority
The FMA is the competent supervisory authority of the financial market participants covered by the regulations. In this function, the FMA strives to carry out its supervisory activities in a way that supports the transformation towards a sustainable financial centre, guided by the political sustainability goals (SDGs). The FMA's mandate includes financial stability, prudential supervision of financial market participants, market integrity, and investor protection. The European Systemic Risk Board (ESRB) considers climate-related risks to be emerging risks to financial stability that need to be monitored, assessed, and mitigated.
As part of prudential supervision, the FMA will supervise the incorporation of sustainability risks and factors into the business strategies of financial market participants and, in particular, compliance with the legislative transparency requirements for the purpose of efficient investor protection. At the same time, the FMA will incorporate sustainability risks into its own stress tests and supervisory analyses and in general into its own crisis prevention and crisis management planning, with a special emphasis on avoiding any sort of "greenwashing".
The FMA also provides topic-related information on the FMA website and in FMA communications and guidance. It observes guidelines of the European supervisory authorities that contribute to supervisory convergence or declares such guidelines applicable in Liechtenstein.
The FMA will integrate sustainability as a further basic principle into its own business strategy and organisational structure, so that the FMA also develops into an environmentally sustainable enterprise with a green footprint. The FMA will strive for appropriate transparency in this regard.