Switzerland Sets Its Sights on Combatting Greenwashing in Finance

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Switzerland’s Federal Department of Finance (FDF) has declared its intention to put forward regulations to challenge greenwashing in the financial realm.

According to ESG Today, this move targets investment products that use labels such as ‘sustainable,’ ‘green,’ or ‘ESG.’ This announcement has been made subsequent to the Swiss Federal Council’s paper release in December 2022, which detailed its stance on counteracting greenwashing.

The Council’s paper on preventing greenwashing contained several measures. Financial items carrying a sustainability label should have at least one investment target beyond their financial objectives. Such goals should align with or contribute to specific sustainability objectives. The product’s documentation needs to clearly indicate which characteristics, or combinations thereof, apply.

The Council clarified that products focusing on lowering ESG risks without pursuing distinct sustainability objectives would not receive a sustainable label. Proposals also encompassed transparency mandates. Financial service firms offering sustainable investment products must elucidate their sustainability strategy, its execution, its measurement techniques, and provide consistent reports on these sustainability targets. These should be corroborated by an autonomous third party.

Moreover, the Federal Council had directed the FDF, in conjunction with various government bodies, regulators, industry groups, and NGOs, to evaluate the feasibility of the proposed measures. In its recent announcement, the FDF has shown its commitment to upholding the Council’s position, favouring a principles-based state regulation approach. This could be complemented by industry-driven self-regulation.

However, the FDF noted that if the finance sector can present a self-regulation solution aligned with the Council’s viewpoint, then the necessity for further regulatory interventions might be eliminated. By August 2024, the FDF has pledged to introduce a draft for consultation regarding this anticipated regulation.

Source : Fintech