Governments around the world are looking to regulate sustainable investments. The EU Taxonomy and SFDR, the SEC’s new Fund Name Rule, and the UK’s developing green taxonomy all seek to bring clarity to the financial services sector and give more investors more confidence in investments advertising their ESG properties. Switzerland is now joining in as the Federal Department of Financing (FDF) recently announced that it will implement the Swiss Federal Council’s position on the prevention of greenwashing in the financial sector. However, if the industry self regulates in time, new rulemaking may be limited. The announcement states that:
“After evaluating the input from the members of the working group, the FDF has decided to implement the Federal Council’s position by proposing principles-based state regulation at ordinance level. Such regulation could be supplemented by industry self-regulation. The FDF will submit a consultation draft to the Federal Council by end-August 2024 at the latest. If, however, the financial industry presents a self-regulation solution that implements the Federal Council’s position effectively, the FDF will dispense with further regulatory efforts.”
Under the new rules, the Swiss FDF will determine which investment vehicles qualify as “sustainable.” Only products with real-world impacts that are aligned with sustainability goals will be permitted to market themselves as “sustainable.” Some are expecting the changes to reduce the amount of funds using the “sustainable” label to drop up to 80%. This is reminiscent of the exodus of Article 9 funds in the EU as the SFDR came into force. It remains to be seen if the Swiss funds will alter their practices to keep their sustainability labelling, or if they will offer the same products under revised names.
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