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With the release of Circular 2026/1 on 17 December 2024, the Swiss Financial Market Supervisory Authority (FINMA) signals that financial institutions in Switzerland must elevate their approach to managing climate and other nature-related financial risks (henceforth “nature-related financial risks”). Unlike previous sustainability and climate disclosure regulations, this circular introduces binding expectations focusing on risk management.
Overview and key requirements
The circular applies to Swiss banks and insurance companies, with a phased implementation: Category 1 and 2 institutions must comply with climate-related financial risk requirements by January 2026, while Category 3 to 5 institutions must follow by January 2027. Full integration of the circular is required across all categories by January 2028.1
Among its main provisions, FINMA compliance calls for established governance structures with clearly defined roles and responsibilities for nature-related financial risks, along with adequate levels of expertise. In addition, institutions must identify and assess the financial materiality of such risks using at least qualitative scenario-based analyses across different relevant time horizons, with Category 3 institutions conducting quantitative assessments for portfolios with elevated risk exposure. Material risks should be integrated into existing risk categories, such as credit, market and insurance risks, using appropriate indicators and limits, aligned with the institution’s risk tolerance for nature-related financial risks. This integration must be supported by updates to control processes, internal monitoring, and reporting. Moreover, Category 1 and 2 institutions must incorporate material nature-related financial risks into their stress testing frameworks to evaluate financial resilience under adverse environmental scenarios. Finally, specific provisions exist for banks and insurances, ensuring risk-specific mitigation and resilience measures across all relevant risk categories.
International regulatory alignment in managing nature-related financial risks
FINMA Circular 2026/1 aligns broadly with emerging international regulatory trends in the treatment of nature-related financial risks, particularly in its emphasis on integrating such risks into existing risk management frameworks. While its scope is limited to environmental factors – focusing on climate and other nature-related risks such as biodiversity loss and ecosystem degradation – it reflects a shift observed across jurisdictions toward forward-looking, risk-based supervision.
For example, the new EBA guidelines on managing ESG risks and the new PRA consultation paper on managing climate-related risks both adopt a similar focus on the integration of such risks into existing risk categories, while scenario analysis is required under all three regimes (including FINMA regulation) with proportionality in method and scope.
For the implementation of the supervisory expectations, FINMA suggests that institutions leverage existing work and international frameworks such as ISSB, TCFD, and TNFD, all sharing a common architecture centered on governance, strategy, risk management, and metrics and targets – elements broadly mirrored in the FINMA Circular. Although FINMA allows for flexibility in the way institutions integrate nature-related financial risks, its reference to third-party standards creates synergies between domestic supervisory compliance and international reporting obligations, thereby facilitating interoperability with global reporting frameworks.