Banks worldwide have pledged to achieve net-zero greenhouse gas emissions in their lending and investment portfolios by 2050, raising hopes that the finance industry is about to leverage its full power to limit global warming. However, net-zero implementation efforts in banking are nascent, and their likelihood of meeting reduction targets remains unclear. In an effort to clarify uncertainties surrounding the mitigation outcomes of such climate commitments, this study investigates net-zero target operationalisation in Swiss mortgage portfolios through extensive stakeholder consultation. The findings show that although measures considered sufficiently impactful to achieve net zero by 2050 exist, institutional fears about market disadvantages should competitors fail to follow suit prevent implementation. Without regulatory interventions, the voluntary net-zero efforts of Swiss banks will be limited to measures with anticipated limited to negligible impacts on decarbonising financed buildings that are insufficient to meet pledged climate targets. This scenario resonates beyond the Swiss context, and great caution is warranted concerning the expected impact of voluntary climate commitments by banks worldwide. Further research is required to determine the extent to which similar dynamics constrain impactful climate target operationalisation across asset classes and countries.

Key Policy Insights

• In principle, Swiss banks have measures at their disposal that are sufficient to achieve net-zero mortgage portfolios by 2050; however, potential market disadvantage risks are preventing the actual adoption of these measures.
• Swiss banks voluntary efforts to implement net-zero targets in mortgage portfolios will not be sufficient to reach net zero by 2050.
• In general, when implementations are solely voluntary, the potential impact of banks' net-zero commitments should be treated with a great deal of caution.
• Urgent policy action is required to establish a regulatory environment that empowers banks to implement the measures required to achieve climate pledges.
• Banks that hesitate to support this process or advocate publicly for required policy changes could face increased difficulties in countering accusations of ‘greenwashing'.