Can greenwashing be prevented through self-regulation?

The FDF wants to implement the Federal Council's views on avoiding greenwashing in a proposal. If the financial sector presents sufficient self-regulation, the FDF will refrain from further regulatory work.

In December 2022, the Federal Council published its position on greenwashing prevention in the financial sector. At the same time, it has instructed the FDF, together with representatives of the Federal Department of the Environment, Transport, Energy and Communications (DETEC), the Federal Department of Economic Affairs, Education and Research (EAER), the Swiss Financial Market Supervisory Authority (FINMA), the industry and non-governmental organizations, to examine how these requirements can be implemented efficiently. In the financial sector, the term «greenwashing» refers to the deception of clients regarding the sustainable characteristics of financial products and services.

FDF draws up a proposal for state regulation at ordinance level

After evaluating the input from the working group members, the FDF has decided to draw up a proposal for principle-based state regulation at ordinance level to implement the Federal Council's position. Such regulation could be supplemented by self-regulation by the sectors. The FDF will submit a consultation draft to the Federal Council by the end of August 2024 at the latest. If the financial sector does present self-regulation that effectively implements the position, the FDF will refrain from further regulatory work.

State regulation is needed

While the Asset Management Association Switzerland (AMAS), the Swiss Bankers Association (SBA) and the Swiss Insurance Association (SIA) welcome the Federal Council's approach, Greenpeace is calling for mandatory government regulation to effectively prevent greenwashing. «The financial sector is relying on self-regulation in the fight against greenwashing. But so far it has not provided any proof that this strategy can protect investors sufficiently from being deceived by financial products labeled as sustainable. Government regulation of greenwashing is therefore essential. This is the only way to hold all players in the Swiss financial center accountable and establish enforceable rights for investors.»

Regulation to define minimum criteria for sustainable financial products

Greenpeace Switzerland is also calling for binding minimum criteria for sustainable financial products to be defined in a corresponding greenwashing ordinance: «Financial products or financial services may only be described as sustainable if they are in harmony with the preservation of our natural resources. In concrete terms, this sometimes means that a sustainable financial product must support an emissions reduction pathway that is compatible with the Paris climate targets and a maximum global warming of 1.5 degrees. The international agreement on the protection of biodiversity and human rights must also be respected and promoted.»

Declaration obligation should demonstrate impact on the real economy

The marketing of financial products or services labeled as sustainable should also be subject to an obligation to declare their impact on the real economy, Greenpeace further demands: «Because only if there is transparency about whether and if so, how these products and services have an impact on the real economy, can the world actually be made more sustainable.»