In a bid to reduce greenwashing the Federal Council has outlined a definition for sustainable investments and set up a working group to examine how this can be implemented.
The Swiss body set out its position in a paper last week, stating financial products can only be labelled as sustainable if they align with one or more specific sustainability goal, or contribute to achieving one or more specific sustainability goal.
Those that just aim to reduce ESG risk or optimise financial performance therefore cannot be described as sustainable.
Definitions for sustainability goals can be broad, the paper said, for example they can be based on the Sustainable Development Goals and include transition targets.
Products aimed at “contributing to the achievement of a sustainability goal” will typically be those using an impact approach or a credible active ownership approach, or both, the paper continued.
The Federal Council also said a firm offering a sustainable product should be able to describe its approach and report on its goals regularly. “This information should be public, easily accessible, transparent and comparable,” it said, including how alignment and/or impact is measured.
These principles should be verified by a third party and “clients, investors and insured persons should have recourse to legal action” if the requirements are not complied with.
The Federal Council has instructed a working group, led by the Federal Department of Finance (FDF), to examine the best way to implement this. In addition to the FDF, the working group will contain representatives from the Federal Department of the Environment, Transport, Energy and Communications; the Federal Department of Economic Affairs, Education and Research; the Swiss Financial Market Supervisory Authority; and industry and non-governmental organisations.
The FDF said it will present the Federal Council with proposals on the next steps by the end of September 2023.
