Thursday , December 3 2020

SNB may have to sell some of its $100bn in US stocks

Bloomberg

The Swiss National Bank (SNB) could be forced to sell a chunk of its more than $100 billion US stock portfolio as part of a campaign to ban it from investing in defense companies.
A poll by gfs.bern for public broadcaster SRG showed 54% of voters in favour of the proposal, which goes to a national vote on November 29.
Such an outcome would forbid the central bank or pension funds from providing financing for a company that derives more than 5% of revenue from arms sales. The SNB estimates it’d have to sell stakes in 300 companies, which together are worth 11% of the value of its portfolio of global stocks.
While few details on its individual holdings are available, its US disclosure forms show it owned shares worth $369 million in Tomahawk cruise missile-producer Raytheon Co as of June, while its stake in Boeing Co., maker of the B-52 bomber, was worth $388 million.
The campaign is the latest assault on the independent central bank, which over the years has faced calls to pay out more money to the government, divest from fossil-fuel producers and even change the way it provides money to the economy.
While the SNB already excludes companies that make internationally condemned weapons like anti-personnel mines from its holdings, excluding ever-more companies could jeopardise the market-neutrality of its investments and complicate policy making.
Because the SNB’s investments, accrued from its foreign exchange interventions to weaken the franc, are designed to support its policy objectives, it seeks to mirror indexes and doesn’t engage in active stock picking.
Supporters of the initiative, proposed by anti-war activists, say it’ll help ensure public money isn’t used in a harmful way. The government, however, opposes the measure, saying it won’t do much to stop arms makers and will make life difficult for pension funds, already facing low returns.
Swiss commodity traders up in arms over bid at foreign liability
Switzerland’s commodity traders are crying foul over a widely supported proposal that would make them liable for lapses on human rights and environmental standards abroad.
Swiss-based companies, like Glencore Plc, or those with major operations in the country, could be taken to court by aggrieved foreign parties, if the “Responsible Business Initiative” passes on November 29.
“This initiative goes way too far,” said Florence Schurch, secretary general of the Swiss Trading and Shipping Association, or STSA, which represents companies like Vitol Group, Gunvor Group Ltd., Cofco International and Mercuria Energy Group Ltd.
The Swiss government also opposes the initiative, saying it will make companies liable for foreign subsidiaries and suppliers. Bern offered a moderate counterproposal that will establish a reporting requirement for publicly owned companies and large financial institutions, but won’t allow them to be taken to court in Switzerland.
Worryingly for Switzerland’s business sector, the corporate responsibility initiative is the latest in a string of plebiscites — including a reform of the tax code and limits on executive compensation — that risk lessening the country’s appeal as a base.
Swiss-based commodity traders handle about a third of the global oil trade, including an estimated 75% of Russian oil. They’re a key pillar of the local economy, generating 35,000 jobs and a big chunk of budgets in Geneva and Zug, according to the STSA.

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