Swiss Federal Council strives to be international leader in sustainable finance with climate transparency

The Swiss financial centre should be a credible location worldwide for investors who want to contribute to the environment and society in a comparable and measurable manner. To this end, the Federal Council adopted various measures during its meeting on November 17, 2021.

The Federal Council recommends that financial market players use comparable and meaningful climate compatibility indicators to help create transparency in all financial products and client portfolios. This can be done with implied temperature indicators, for example. Here, the production plans of companies included in the portfolios are compared with a pathway that is needed to limit maximum warming to 1.5° Celsius. Such indicators provide clients with a straightforward understanding of how financial products can be classified in terms of their impact on the climate. At the same time, the Federal Council is encouraging the financial sector to join net-zero international alliances and is working towards industry agreements with this in mind. Net zero means that global emissions of greenhouse gases may not exceed the amount that can be absorbed by natural and technical sinks.

Greenwashing occurs when clients of financial institutions are knowingly or unknowingly deceived or misled about sustainability characteristics of financial products and advisory processes. Therefore, it makes sense to promote uniform definitions of sustainability impacts. The subsidiary role of the state should be maintained insofar as possible. Since Switzerland has entered into climate-related commitments for the financial market by signing the Paris Agreement, an initial focus on climate impacts is appropriate. This focus is in line with international developments such as those of the G20 and EU.

The Federal Council has also instructed the Federal Department of Finance (FDF), in cooperation with the Federal Department of the Environment, Transport, Energy and Communications (DETEC), to inform it by the end of 2022 of the extent to which the financial sector has implemented the above-mentioned recommendations and to propose measures if need be. Finally, the Federal Council has instructed the FDF, in cooperation with the DETEC and FINMA, to propose by the end of 2022 how financial market legislation could be amended – particularly with regard to transparency – in order to avoid greenwashing.

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