The Swiss government (Federal Council) is holding back on introducing state regulation to fight greenwashing, while the European Union paves way to reforming the Sustainable Finance Disclosure Regulation (SFDR), and the banking and asset management industries put forward their own self-regulatory framework.

The cabinet concluded yesterday that, “at this time”, state-sponsored rules on greenwashing would not be introduced, given the EU’s ongoing work on amending the SFDR, and the major importance of the European market for the Swiss financial centre.

It has, however, instructed the Finance Ministry to re-assess the possibility to fully implement the Federal Council’s position on preventing greenwashing in the financial sector, published in December 2022, once the EU publishes any amendments to its SFDR, and by the end of 2027 at the latest, it added in a note.

This week, the European Supervisory Authorities (ESAs) published a joint position highlighting changes to reduce the complexity of the SFDR framework by introducing two product categories – “sustainable” and “transition”.

To reduce the risk of greenwashing, rules for the categories should have a clear objective, and products offered beyond the two categories should undergo “appropriate disclosures”, the ESAs said.

Switzerland is leaving it to the banking, asset management, and pensions industries to define their own rules, a less invasive approach by the state on sustainable investing and greenwashing.

The Asset Management Association Switzerland (AMAS) reviewed the self-regulation on transparency and disclosure for sustainability-related collective assets to prevent greenwashing at the end of April.

Yesterday, the Federal Council gave the green light to the new self-regulatory provisions that will soon come into force, with a transitional period for implementation up to 1 January 2027, it said.

According to the government, the new self-regulatory provisions implement various aspects of the Federal Council’s position on greenwashing, including the definition of sustainable investment objectives, the description of the sustainability approaches applied, accountability, and audits by an independent third party.

Unresolved issues remain on the implementation of the self-regulatory provisions when applying EU law, and on the reference framework for sustainability targets and enforceability, it added.

AMAS, the Swiss Bankers Association, and the Swiss Insurance Association, that also designed their own self-regulations on ESG and greenwashing, welcomed the Federal Council’s decision.

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