Switzerland Takes Aim at Combating Greenwashing in Finance

Switzerland’s Federal Department of Finance (FDF) is gearing up to tackle greenwashing in the financial sector, a significant move aimed at ensuring transparency and integrity in sustainable investments, according to Fintech Global News. As reported by ESG Today on October 26, 2023, the FDF’s initiative comes as a response to the Swiss Federal Council’s commitment to addressing the issue of greenwashing, as outlined in their paper released in December 2022.

The primary focus of this endeavor is to scrutinize investment products that bear labels such as ‘sustainable,’ ‘green,’ or ‘ESG’ (Environmental, Social, and Governance). In line with the Council’s guidelines, the FDF’s regulations will set stringent criteria for these labels, ensuring that they accurately reflect the sustainability objectives of the financial products.

The Council’s paper on combating greenwashing introduced several measures that form the basis of the forthcoming regulations. One of the key requirements is that financial products carrying a sustainability label must have at least one investment goal that goes beyond their financial objectives. These objectives should align with specific sustainability targets, contributing to broader environmental and social goals. Furthermore, the product documentation must clearly specify which characteristics or combinations thereof justify the use of such labels.

In a bid to enhance transparency and accountability, the Council clarified that financial products solely focused on mitigating ESG (Environmental, Social, and Governance) risks, without actively pursuing distinct sustainability objectives, would not be eligible to receive a sustainable label. Additionally, the proposed regulations will mandate financial service firms offering sustainable investment products to provide a detailed account of their sustainability strategy, execution methods, measurement techniques, and consistent reporting on sustainability targets. To ensure the credibility of these reports, they should be independently verified by a third party.

The Federal Council has urged the FDF to collaborate with various government bodies, regulatory agencies, industry associations, and non-governmental organizations (NGOs) to assess the feasibility of these proposed measures. In its recent announcement, the FDF has expressed its unwavering commitment to align with the Council’s stance, preferring a principles-based approach to state regulation. Industry-driven self-regulation may also play a complementary role in ensuring compliance.

However, the FDF has left the door open for the finance sector to propose self-regulation solutions that align with the Council’s objectives. If the industry can develop and implement effective self-regulation mechanisms, the need for further regulatory intervention may be obviated. The FDF has set a deadline of August 2024 to present a draft regulation for public consultation, marking a crucial milestone in Switzerland’s efforts to combat greenwashing in finance.

Switzerland is taking decisive steps to combat greenwashing in the financial industry, with the FDF preparing to introduce regulations that will impose stringent criteria on sustainability labels, promote transparency, and ensure that sustainable investments genuinely contribute to environmental and social objectives. This initiative reflects Switzerland’s commitment to responsible finance and aligns with global efforts to create a more sustainable and transparent financial landscape.

Other articles
Mastercard Expands Platform to Accelerate Fintech Card Programs
Real-Time Payments Drive Economic Growth and Financial Inclusion, Report Finds
How Artificial Intelligence Improves Real-Time Data for Investors
AI and Gen AI: A Disruptive Force Across Global Industries
The Hidden Roadblock to EV Adoption: Payment Anxiety
The Impact of AI on Financial Services
Klarna Integrates with Apple Pay for BNPL Payments
Toyota Insurance Teams Up with Lemonade to Expand Service Offerings
Oracle Introduces AI-Driven Case Management to Combat Financial Crime
Healthcare Providers Embrace Digital Payments to Simplify Billing
In-Car Payment Market Could Reach $580 Billion by 2030, Says Pairpoint Research
Mastercard Advances the Progress of Real-Time Card Payments
Cash Flow 2.0: Smarter Treasury Strategies through Better Business Payments
Klarna Partners with Apple to Offer Flexible Payment Plans
Backbase Unveils AI-Powered Intelligence Fabric to Transform Banking Operations