Sustainable Pillar 3a: What ESG really means
Almost every 3a provider now offers sustainable variants. A study commissioned by the federal government concludes, however, that only around a tenth of 3a securities pursue a real impact claim. Compando shows what ESG actually measures, how you recognise genuine sustainability and what it costs.
1. What does a sustainable Pillar 3a mean?
A Pillar 3a is sustainable only once its securities do more than avoid environmental risks. The abbreviation ESG stands for Environmental, Social and Governance. It describes which criteria a fund examines. What an investment achieves is not what it says. The Federal Council has closed that gap.
In its position on greenwashing prevention of December 2022 it set out when a financial product may call itself sustainable at all: it must contribute to a sustainability goal or at least be compatible with one. Products that merely reduce ESG risks do not count as sustainable. Steering such risks belongs to the duty of care of every asset manager. It is not a promise of sustainability.
Behind this lie three very different motives:
- Risk: you want to protect your money from environmental and climate risks. A financial goal.
- Values: you do not want to help finance certain sectors, such as coal, weapons or tobacco. This is implemented through exclusion lists.
- Impact: you want your capital to actually change something. That calls for active influence on companies or targeted investment in the energy transition.
A pure ESG risk view does not meet the Federal Council's standard. Anyone who wants to invest sustainably therefore has to start with values or with impact.
In Pillar 3a this concerns the securities alone. A 3a interest account cannot be made sustainable. Sustainable 3a solutions therefore rely on ESG funds or on sustainable index solutions.
2. How sustainable is the Swiss 3a range really?
Considerably less so than the product names suggest. A study by the ZHAW commissioned by the Federal Office for the Environment (FOEN) examined more than 150 Swiss Pillar 3a products in 2024. The result:
Finding | Share |
|---|---|
3a capital held in securities (rest: account and policy) | around 30 % |
Of which with a real impact claim | around 10 % |
Share of total 3a assets | around 3 % |
Providers with a sector-based climate strategy | none |
Around half of 3a securities do pursue ESG approaches. The majority of these are risk-based and therefore fall outside the Federal Council's definition of sustainability.
The reason lies in the metric itself. Market leader MSCI points out explicitly that its ESG ratings map financial materiality alone. They show how environmental and social issues act on a company, not how the company acts on the environment. A high ESG rating therefore measures your risk, not your impact.
On top of that comes a structural limit of tied pension provision: the most effective investments are not possible in Pillar 3a at all. Because you can transfer your capital at any time or withdraw it for home ownership, the investments have to stay liquid. Private equity, infrastructure projects or real estate investment foundations are legally permitted but not investable in practice.
3. How do I recognise a genuinely sustainable 3a solution?
The term itself does not help you, because it is not protected. What makes it harder: according to the FOEN study, providers practically never declare their sustainability motive. It stays open whether a fund uses sustainability as a risk tool or whether it aims for impact.
Four questions take you further in a concrete case:
Question | What to look for in the factsheet |
|---|---|
What goal does the fund pursue? | risk, values or impact, expressly named |
What is excluded? | a concrete list with thresholds, not just a buzzword |
Is the voting right used? | details on engagement and voting record |
Is there reporting? | an annual report that measures the goals |
There is movement on the third point: around 46 percent of 3a securities already practise engagement and the exercise of voting rights. For exchange-traded investments this route counts as the most effective one open in Pillar 3a at all.
A second guide are the Swiss Climate Scores, a federal standard with six indicators on the climate compatibility of an investment. Their application is voluntary. At the end of 2022 not a single 3a provider disclosed them, and the first have since begun to do so. Whoever publishes them makes the climate impact of their funds comparable in the first place.
If all four questions remain unanswered, the green label says more about the provider's marketing than about the fund.
4. What does a sustainable Pillar 3a cost?
Less than most expect. Where a provider offers both variants, the sustainable one costs 0.05 to 0.16 percent more per year according to the FOEN study. Over 30 years that adds up, but it stays far below the gap between a passive and an active investment solution. It is different with genuine impact products: they often cost around 2 percent per year and are barely available in Pillar 3a in any case.
On returns, caution is called for in both directions:
- With ESG approaches that primarily steer financial risks, the majority of studies show no return disadvantages, in part even slight advantages. That is hardly surprising, because these approaches are financially motivated.
- For strategies that genuinely aim for impact, theory points rather to a slightly lower yield. Robust evidence for this is lacking.
Anyone promising you a higher return because an investment is sustainable is promising too much. Two things stay untouched in any case: your return expectation is set by the equity share and not by the label, which is what your investment strategy governs. The tax deduction is the same, sustainable or not.
Which claim a fund pursues and what it costs on top is set out in its factsheet. Only few Swiss 3a solutions disclose both openly. That is exactly how you recognise a serious provider.
Checking providers pays off
Which 3a solution suits you on costs, equity share and minimum deposit is shown by the direct comparison of all Swiss providers.
