Switzerland to Introduce Labelling and Disclosure Rules for Sustainable Investment Products
Switzerland’s Federal Department of Finance (FDF) announced today that it will proceed with plans to propose regulations to address greenwashing in the financial sector, including investment and disclosure rules for financial products using labels such as ‘sustainable,’ green,’ or ‘ESG.’
The announcement follows the release in December 2022 of a paper by the Swiss Federal Council outlining its position on the prevention of greenwashing, or the risk of having a financial product falsely or misleadingly portrayed as having sustainable characteristics.
Measures outlined in the Council’s greenwashing prevention position included requiring financial products that feature a sustainability label to pursue at least one investment objective, in addition to their financial goals, to align with one or more specific sustainability goals, or to contribute to the achievement of specific sustainability goals, and for product documentation to specify which of these characteristics, or combination of characteristics applied.
The Council noted that under this definition, products that are aimed at reducing ESG risk, without pursuing a specific sustainability goal, will not qualify for a sustainable label.
The Council’s proposals also included transparency rules, including requiring financial service providers offering sustainable investment products to describe their sustainability approach, and how the approach is achieved and measured, as well as regular reporting on the defined sustainability goals, along with verification by an independent third party.
The Federal Council also instructed the FDF at the time, along with other government agency representatives, regulators and industry and NGO organizations to assess how the proposals could be implemented. With today’s announcement, the FDF said that it would implement the Council’s position by proposing principles-based state regulation, with the regulation potentially supplemented by industry self-regulation.
The FDF added, however, that if the financial industry presents a self-regulation solution that meets the Council’s position, it will dispense with further regulatory efforts.
The FDF committed to submit a consultation draft for the proposed regulation by August 2024.