Following years of engagement with the bank, ShareAction, Ethos Foundation, and 11 institutional investors representing EUR 2.18 trillion, including Amundi, LGPS Central, and PUBLICA – the Swiss federal pension fund, filed a shareholder resolution on climate change at Credit Suisse in March 2022 (Agenda item 9 on Credit Suisse’s proxy ballot).

For a summary of ShareAction’s long history of engagement with the bank, see page 12 of our earlier investor briefing.

Through a proposed amendment to the bank’s articles of association, we are asking Credit Suisse to provide further disclosures on the Company’s strategy to “align [its] financing with the Paris Agreement objective of limiting global warming to 1.5°C” and the short-, medium- and long-term steps the bank plans to take to reduce its exposure to coal, oil, and gas on a timeline consistent with its own alignment goal.

Since the resolution was filed, Credit Suisse has issued new climate commitments. These new commitments reflect the positive influence that shareholder engagement can have. Nevertheless, they remain insufficient in the eyes of the EUR 2.2 trillion investor coalition, as they fail to cover the bulk of the bank's fossil fuel financing activities.

In this briefing, we aim to provide clarity on what the bank has committed to doing in the past month, how it compares to leading and best practice, and what remains to be done.

We argue that Credit Suisse’s shareholders must vote ‘FOR’ Agenda item 9 at the bank’s AGM on 29 April.

In its 2021 TCFD report, published after the resolution was filed, Credit Suisse released a new set of disclosures on its financed emissions and set its first sectoral target for the oil, gas, and coal sector. Our previous briefing raised concerns over the quality of the bank’s past disclosures, which invited caution with regards to its forthcoming targets – these concerns were well-founded.

By not covering capital markets activities, Credit Suisse excludes the bulk of its financing to oil & gas companies with large expansion plans (see Figure 1). Omitting these activities from its targets thus provides an incomplete and possibly misleading view of the transition risks faced by the bank to investors - Credit Suisse earns the highest fees from its investment bank of any other European bank since 2000. Barclays has covered capital markets activities in its targets and disclosures since 2020.

The metric used by Credit Suisse to model its lending activities also underplays transition risk and financial support to fossil fuel companies. The bank’s methodology is based on drawn amounts. This includes the portion of loans that are utilised by borrowers on the reporting date, without consideration for the total amount that the bank has committed to providing (and on which it earns a commitment fee). While this is in line with the PCAF methodology, Barclays and UBS use total commitments, which is a more ambitious approach reflecting the maximum impact of their lending activities and also reduces financed emissions volatility (see below for a discussion on how this could have impacted Credit Suisse’s reporting against its target).

UBS takes a precautionary approach by setting a more ambitious than its benchmark. Credit Suisse, however, only tracks its benchmark scenario. This is concerning given the low probability of success of most climate scenarios and inherent uncertainties in portfolio modelling. ShareAction has been urging banks to add buffers to their targets.

Credit Suisse now sorely lags its peers having only set an interim target for one high-carbon sector – coal, oil & gas. It hasn’t disclosed when it intends to set targets for power or other climate-critical sectors. In comparison, UBS now covers four sectors and Barclays covers five with plans to cover several more over time.

Credit Suisse disclosed a preliminary estimate that its financed emissions for the coal, oil & gas sector reduced by 41 per cent from 2020 to 2021, which it attributes to its strategy. However, this figure should be interpreted with care before it is considered a mark of progress since:

• While Credit Suisse reported a significant decrease in fossil fuel lending overall in 2021, we found that the bank increased its financing (lending and capital markets facilitation) to top upstream oil & gas expanders by 40 per cent to US$3.3 billion in 2021, a level consistent with its pre-pandemic financing activity.

• This increase was mostly through capital markets underwriting. Credit Suisse does not include capital markets activities in its financed emissions calculations or targets. The bank also withholds disclosing volumes of capital markets financing provided to the fossil fuel sector (as opposed to Barclays). Investors have no visibility on whether overall financing has increased or decreased.
  
  
• As discussed above, Credit Suisse calculates its financed emissions based on the drawn portion of loans at year-end. This figure is volatile and will substantially fluctuate based on liquidity needs, even more so during periods of liquidity crunch like the one faced by energy companies in 2020 due to the pandemic.

Investors should also question whether Credit Suisse is aligning its business model to net-zero quickly enough to mitigate transition risk. According to a recent study led by the Rainforest Action Network (RAN), Credit Suisse’s overall fossil fuel financing has decreased since 2016. However, while Credit Suisse is ‘only’ the 40th largest bank by assets, it is the 19th largest provider of fossil fuel financing globally. In fact, in 2021, the bank was the second largest European fossil fuel financier relative to its size despite being the 16th largest European bank by assets.

Our previous briefing highlighted material gaps in Credit Suisse’s fossil fuel policies. In our view, Credit Suisse’s risk management framework is not yet aligned with a net-zero ambition.

Oil & gas expansion is absent from Credit Suisse’s announcement. Concerns over recent thermal coal commitments have not been addressed

As discussed above, Credit Suisse’s financing to oil & gas companies with large expansion plans remains consistent despite its net-zero commitment. Yet oil & gas expansion is absent from Credit Suisse’s announcement. The NGFS scenario Credit Suisse has relied on to set an emission reduction target for its fossil fuel portfolio is not as prescriptive as the IEA NZE in terms of investment guidance. However, as we note in our recent report on oil & gas expansion, it would necessarily lead to a similar conclusion: new oil & gas fields are not needed in a net-zero pathway. Other European banks including NatWest, ING, and UniCredit have started to update their oil & gas policies in line with this guidance. HSBC recently acknowledged it and pledged to review client’s transition plans for compatibility with its net-zero target.

Under pressure from investors, the bank published a new coal policy in November 2021, which we analysed in depth in our recent briefing. While these new commitments are welcome, Credit Suisse has not addressed several requests made by a coalition of investors representing US$2.5 trillion to tighten its thermal coal policy at its 2021 AGM. This includes providing further information on how it assesses companies’ coal transition strategies, as its policy exempts companies with a ‘credible’ transition plan. And contrary to other banks like Crédit Agricole, the core tenets of Credit Suisse’s policy don’t apply to its Asset Management arm.

Risk management framework’s effectiveness is difficult to gauge

Credit Suisse’s approach to address these issues is heavily reliant on its Client Energy Transition Framework (CETF), a methodology it uses to categorise clients according to their energy transition readiness on a scale from “Unaware” to “Aligned”. Credit Suisse notes that “Unaware” clients, “who generally do not have transition plans”, will be phased-out over time. According to the bank, this led to a US$ 1 billion decrease of exposure to “Unaware” fossil fuel clients in 2021.

However, the CETF continues to be opaque, and its effectiveness is difficult to gauge. Timelines and mechanisms to phase-out, upgrade, or downgrade clients are not specified, and while Credit Suisse has unveiled some of the assessments it uses to categorise clients, each category’s minimum requirements are unknown (see FigureS 3 & 4). For example, an “Aware” client would have to set “qualitative/quantitative emissions reduction targets”, but nothing is known about the minimum ambition in terms of temperature goal. And contrary to some other frameworks like the CA100+ benchmark, the CETF doesn’t seem to assess whether a company’s capital expenditure aligns with its climate targets. This is critical to assess companies’ expansion plans.

Credit Suisse will announce long-overdue updates to its unconventional oil & gas policy. These will not cover fracking, which represents the bulk of Credit Suisse’s unconventional financing.

As we noted in our recent briefing, Credit Suisse has done very little to address its financing to unconventional oil & gas activities – oil sands, fracking, Arctic oil & gas, and ultra-deepwater oil & gas – despite serious environmental and financial risks. So far, the bank has only implemented project finance restrictions for Arctic oil & gas based on a narrow definition of the Arctic region.

The AGM notice includes a commitment to introduce new restrictions related to the financing of oil sands and Arctic oil & gas. Details of these commitments have not been published yet. This is something investors have been pushing for, and we will analyse the new policy in due course. For these commitments to be credible, they should include corporate finance thresholds that cover both upstream and midstream activities and lead to a phase-out over time. For example, BNP Paribas has committed not to finance diversified companies for which unconventional oil & gas exploration and production represent a significant share of their total revenue, and to companies that own or operate pipelines or LNG export terminals supplied with a significant volume of unconventional oil & gas. And Nordea and Intesa Sanpaolo have committed to terminate their exposure linked to unconventional resources by 2030.

Regardless of their strength, these commitments should not divert attention from the fact that Credit Suisse’s announcement does not cover fracked oil & gas. This is by far the unconventional segment the bank is financing the most. The bank ranks 11th globally and 2nd in Europe for fracked oil & gas financing between 2016 and 2021. We also found that within the group of top upstream oil & gas expanders which Credit Suisse finances, many are heavily exposed to shale oil & gas. This activity has been shown to be one of the most at risk of asset stranding in a 1.5C pathway, with some of Credit Suisse’s clients seeing their production fall by over 80 per cent by the 2030s in the IEA NZE.

In response to the investor-led resolution, Credit Suisse has announced it would be offering an advisory vote to its shareholders in 2023 on its sustainability report, which will contain additional disclosures on the short-, medium-and long-term steps it will take to reduce its exposure to fossil fuel assets on a timeline consistent with its own alignment objective.

This is not equivalent to shareholders’ requests.

Firstly, given the significant risk scandals and associated high turnover rate in senior staff members and key delivery teams, investors should welcome a statement from the bank about setting new climate policies in the future with caution. At least 5 board members have left or been asked to leave in the past year, and an important number of senior sustainability staff recently left the firm, including Credit Suisse’s former Chief Sustainability Officer and Global Head of Sustainable Finance. More recently, Mike Dunne, a former Bank of America executive who in December 2021 was named Global Head of Power and Renewables Investment Banking at Credit Suisse, decided not to join the bank after all. Credit Suisse’s high turnover rate and inability to reinforces the importance of the bank enshrining its commitment to align with 1.5C in its articles of association, as several UK banks such as Barclays and HSBC have already done. This would give new directors and sustainability staff a mandate to act boldly on climate, which shareholders believe would have a positive impact on the bank’s reputation, share price, and profitability. Several of Credit Suisse’s European peers, including Barclays and HSBC, have already introduced climate articles.

Secondly, shareholders are asking for these disclosures and commitments to be made in the management report, as opposed to the bank’s sustainability report, in line with TCFD guidance.

Thirdly, Swiss companies will be required to offer binding votes on their sustainability reports from 2024 onwards, and Credit Suisse’s main competitor UBS has already offered such a vote in 2022. Credit Suisse’s commitment is therefore hardly standard setting.

Finally, and as demonstrated in this brief, Credit Suisse’s current strategy fails to cover the bulk of its fossil fuel financing activities. In meetings with the bank, the investor co-filing group did not receive assurance that future disclosures and plans would address investors' main concerns in its 2023 sustainability report.

As our previous briefing demonstrated (p13-18), Credit Suisse’s reputation and share price have plummeted following a string of high-profile risk scandals. Since filing the resolution in March 2022, new scandals have already come to light.

We believe that our resolution presents important opportunities for the bank and its investors. The resolution would not only help the bank restore trust, it would also strengthen its resilience to future climate shocks. Finally, it would allow Credit Suisse to take advantage of important climate-related opportunities. For example, we believe that an improved climate strategy would draw an important new stream of High-Net-Worth Individuals to the Private Bank.

We, therefore, urge investors in Credit Suisse – both shareholders and bondholders – to:

1. Write to the bank expressing their support for the resolution, and consider making their support for the resolution public.
2. In the case of shareholders, cast a vote in favour of the resolution ahead of the bank’s AGM on 29 April 2022.
3. Get in touch with ShareAction (see below) should they have any questions about this engagement, the bank’s climate performance, or ShareAction’s banking work in general.