Industry Updates

Switzerland to implement sustainable fund label rules amid greenwashing concerns

Regulators globally are addressing ESG fund naming rules

Theo Andrew

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The Swiss Federal Council is set to implement new sustainable fund rules for asset managers which label their products “sustainable”, “green” or “ESG” in a bid to crack down on greenwashing.

Under new proposals by the Swiss Federal Council, asset managers will be required to disclose how the fund meets the objective in order to offer investors a clearer picture of the sustainable investment landscape.

It comes as financial regulators globally look to tackle the issue of greenwashing, especially around the naming of funds which has been described as a “powerful marketing tool” for asset managers.

In November 2022, the European Securities and Markets Authority (ESMA) announced new rules for the naming of ESG-related funds to “address any misuse” of the Sustainable Finance Disclosure Regulation (SFDR).

A month earlier, the Financial Conduct Authority (FCA) proposed a raft of new measures including sustainable investment labels and consumer-facing disclosures to boost consumer trust.

Now, the Swiss Federal Council has become the latest regulator to propose fund name rules.

According to the proposals, financial products labelled as sustainable must align with one or more specific sustainability goals such as equities and bonds of companies that are aligned with the Paris Agreement climate targets.

Alternatively, funds must contribute to achieving one or more specific sustainability goals – which it defines as impact investing – such as direct investments into new solutions for renewable energy.

The Swiss regulator also recommended the sustainable goals should be defined “using the widest possible reference framework” such as the United Nation’s Sustainable Development Goals.

It added the information should be “public, easily accessible, transparent and comparable” with “efficient and appropriate reporting” on relevant indicators.

However, the plans will likely not be introduced until beyond 2023.

The Swiss Federal Council said it will set up a working group to establish “concrete proposals” by 30 September 2023.

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