The Federal Council has paid attention to the financial industry's self-regulation against greenwashing. This represents progress in implementing the Federal Council's position on preventing greenwashing in the financial sector, as stated in a press release on Wednesday.

However, governmental intervention is not completely off the table. The Federal Council intends to further examine state regulations, taking into account ongoing regulatory developments within the European Union.

Deception of Customers

Greenwashing refers to the misleading of customers regarding the sustainable attributes of financial products and services.

The Federal Department of Finance (FDF) had announced its intention to present a draft ordinance by the end of August 2024. This was aimed at implementing the Federal Council's position from December 2022, following consultations with relevant authorities, umbrella organizations, and non-governmental organizations.

But, the FDF planned to forgo regulatory work if the financial sector could demonstrate effective self-regulation that aligns with the Federal Council's position.

Self-Regulations Expected to Soon Take Effect

The self-regulations adopted by the Swiss Bankers Association, the Asset Management Association Switzerland and the Swiss Insurance Association have been taken note of, states the Federal Council. They are expected to be published and enforced soon, with transitional periods planned until January 1, 2027.

Some aspects of the Federal Council's requirements are considered fulfilled, while others remain open. The former includes defining sustainable investment goals, describing sustainability approaches used, accountability, and third-party verification. Remaining issues concern compliance with EU law through the application of self-regulations and the permissible reference framework for sustainability goals and enforceability.

Temporary Abstention from State Regulation

«Taking into consideration this progress, the European Union's ongoing work on amending the Sustainable Finance Disclosure Regulation (SFDR) and the major importance of the European market for the Swiss financial centre, the Federal Council is refraining from introducing state regulation to combat greenwashing in the financial sector at this time,» the statement continues.

The FDF will reassess the need for action once the European Union publishes any amendments to its SFDR, no later than the end of 2027.