The Environmental Footprint and Risk Exposure of a National Financial System

This paper develops a macroeconomic framework to measure the environmental footprint of a national financial system. By combining the national financial accounts with an environmentally extended multi-regional input–output (EE-MRIO) model, we estimate the greenhouse gas (GHG) emissions and other environmental pressures indirectly financed by domestic financial institutions. The framework allows us to reconstruct “from-where-to-where” exposures across institutional sectors and asset classes, while accounting for the full chain of financial intermediation and avoiding double counting. Applying this methodology to the Swiss financial system, we find that financed emissions amount to 120 million tons of CO2e in 2022, around 2.9 times Switzerland’s territorial emissions. Although emissions per unit of assets have declined, the overall footprint remains large due to asset growth and substantial foreign exposures. Extending the analysis beyond GHGs, we show that financed pressures on land use, water use, and material resource extraction are of similar magnitude to Switzerland’s consumption-based environmental footprint.