FINMA circular on nature-related financial risks phases in

Circular 2026/1 of the Swiss Financial Market Supervisory Authority (FINMA) (external site) sets out how Swiss banks and insurers identify, assess and manage nature-related financial risks. These are risks of financial loss caused by climate change and by other changes in nature (FINMA (external site)).

Such risks reach a balance sheet in two ways: physical damage, such as floods that hit insured property or a borrower's assets, and the shift to a lower-carbon economy, which can reduce the value of some assets (FINMA (external site)). A circular states how FINMA applies the law in its supervision.

Before the circular, FINMA rules on climate focused on disclosure by larger institutions (FINMA (external site)). The circular adds supervisory expectations on risk management itself.

Institutions assess which nature-related risks are material and use scenario analysis. They treat these risks as drivers of existing risk categories, such as credit, liquidity and operational risk, and of insurance activities (FINMA (external site)).

Expectations scale with size. FINMA applies proportionality and sets higher expectations for larger and more complex institutions (FINMA (external site)).

As an example, a bank with many mortgages in a flood-prone valley treats flood risk as a driver of credit risk on those loans (FINMA (external site)).

Swiss banks and insurers are covered, while institutions in the small banks regime and the small insurers regime are outside its scope (FINMA Circular 2026/1 (external site)). FINMA sorts institutions into categories from 1, the largest, to 5, the smallest (FINMA (external site)).

A Credit Risk Analyst adds nature-related drivers to borrower assessment, and a Credit Risk Model Developer reflects them in scenario analysis (FINMA (external site)).

An Underwriting Analyst and a Reinsurance Analyst consider physical risks on the liability side, where non-life insurers and reinsurers are most exposed (FINMA (external site)).

A Sustainable Finance Analyst prepares the materiality assessment. A Compliance Officer and an Internal Auditor check that the dates and expectations of the circular are applied (FINMA Circular 2026/1 (external site)).

FINMA published the circular in December 2024. It entered into force on 1 January 2026 and first covers climate-related financial risks only (FINMA (external site)).

Category 1 and 2 institutions apply it to climate risks from 1 January 2026, and category 3 to 5 institutions from 1 January 2027 at the latest (FINMA Circular 2026/1 (external site)).

All institutions apply the circular in full, to all nature-related financial risks, by 1 January 2028. These dates are confirmed (FINMA (external site)).

FINMA consulted on the draft from February 2024 (FINMA (external site)). The final text follows principles of the Basel Committee on Banking Supervision and the International Association of Insurance Supervisors, and parts of the recommendations of the Network for Greening the Financial System (NGFS) (FINMA (external site)).

In 2023 FINMA announced it would apply NGFS recommendations in supervision (FINMA (external site)). In July 2024 an evaluation of the climate disclosure rules for larger institutions left them unchanged (FINMA (external site)).