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The financial industry will be allowed to monitor itself, since the sector’s associations have made progress in creating and putting into effect self-regulatory measures, instead of the Swiss Federal Council enforcing regulations against greenwashing.
The decision was made in response to a report published in December 2022 by the Swiss Federal Council summarizing the council’s views on preventing “greenwashing,” or the danger of misrepresenting the sustainability of a financial instrument. The Council’s greenwashing prevention position included measures like requiring financial products with a sustainability label to align with one or more specific sustainability goals, pursue at least one investment objective in addition to their financial goals, or help achieve specific sustainability goals. Product documentation also had to specify which of these characteristics, or combination of characteristics, applied.
The transparency rules included in the Council’s proposals also required financial service providers offering sustainable investment products to provide a description of their sustainability approach, including how it is achieved and measured. Regular reporting on the established sustainability goals was also mandated, as was independent third-party verification.
The Swiss Federal Department of Finance (FDF) stated in October 2023 that it will implement regulations this year to address its stance on greenwashing. However, it also stated that it will postpone its regulatory efforts until the financial industry offers a self-regulation solution that aligns with the Council’s stance.
The Swiss Bankers Association (SBA), the Swiss Insurance Association (SIA), and the Asset Management Association Switzerland (AMAS) declared in a statement that they would create the necessary self-regulation in response to the FDF’s October announcement. They added that they “remain convinced that self-regulation is an effective and, compared to principle-based regulation, more flexible instrument to avoid greenwashing.”
The Council did draw attention to a few “unresolved issues,” nonetheless, such as using EU legislation to comply with the rules and the permitted framework for sustainability objectives and enforceability.
In light of the developments, the Council directed the FDF to reassess after the EU published possible changes to its Sustainable Finance Disclosure law (SFDR) and said that it “is refraining from introducing state regulation to combat greenwashing in the financial sector at this time.”
Finance groups AMAS, SBA, and SIA praised the decision and reiterated their belief that “self-regulation is the most suitable instrument for avoiding greenwashing” in a joint statement issued after the Council’s announcement.