Finance

Sustainable finance: Federal Council wants to combat greenwashing

The government wants to make the Swiss financial center a leader in eco-responsible investment.

Switzerland must become a model for eco-responsible investment. The Federal Council wants to take measures to prevent greenwashing and make the Swiss financial center a leader in this area.

Financial market operators must be transparent. All financial products and client portfolios should have comparable and meaningful climate compatibility indicators.

Investors will then be able to make better-informed decisions, the government says in a report on the climate compatibility of the financial market. More and more of them are aiming for positive effects on the climate in addition to purely financial benefits.

To be effective, these transparency measures must allow comparable conclusions to be drawn. They must be future-oriented and build on the climate goal of the Paris Agreement.

Greenwashing

The financial sector is invited to join international “net zero” alliances. Furthermore, the Federal Council wants a uniform definition of the effect of investments on sustainable development in order to avoid greenwashing.

To counter “greenwashing”, it is counting on the conclusion of sectoral agreements with financial market players. The government has already entrusted the administration, in December 2020, with a review mandate to this effect.

Adaptations

The Federal Council has also instructed the Federal Department of Finance (FDF), in collaboration with the Federal Department of the Environment (DETEC), to submit to it a status report on the implementation of these recommendations by the end of 2022 by the financial sector. Proposals for measures may be presented if necessary.

Finally, the Federal Council has instructed the FDF, in collaboration with DETEC and Finma, to make proposals to it by the end of 2022 on how financial market law could be adapted, particularly in terms of transparency, to avoid greenwashing.

Sustainable finance: Federal Council wants to combat greenwashing
The government wants to make the Swiss financial center a leader in eco-responsible investment.

Switzerland must become a model for eco-responsible investment. The Federal Council wants to take measures to prevent greenwashing and make the Swiss financial center a leader in this area.

Financial market operators must be transparent. All financial products and client portfolios should have comparable and meaningful climate compatibility indicators.

Investors will then be able to make better-informed decisions, the government says in a report on the climate compatibility of the financial market. More and more of them are aiming for positive effects on the climate in addition to purely financial benefits.

To be effective, these transparency measures must allow comparable conclusions to be drawn. They must be future-oriented and build on the climate goal of the Paris Agreement.

Greenwashing

The financial sector is invited to join international “net zero” alliances. Furthermore, the Federal Council wants a uniform definition of the effect of investments on sustainable development in order to avoid greenwashing.

To counter “greenwashing”, it is counting on the conclusion of sectoral agreements with financial market players. The government has already entrusted the administration, in December 2020, with a review mandate to this effect.

Adaptations

The Federal Council has also instructed the Federal Department of Finance (FDF), in collaboration with the Federal Department of the Environment (DETEC), to submit to it a status report on the implementation of these recommendations by the end of 2022 by the financial sector. Proposals for measures may be presented if necessary.

Finally, the Federal Council has instructed the FDF, in collaboration with DETEC and Finma, to make proposals to it by the end of 2022 on how financial market law could be adapted, particularly in terms of transparency, to avoid greenwashing.

For “green” federal loans

The Swiss financial center must play a leading role in sustainable finance. The Federal Council wants to set an example and allow the issuance of “green” federal bonds. A framework will need to be created.
Switzerland already plays a leading role internationally in the area of ​​sustainable financial investments. But the Federal Council wants to go further, he announced in a press release on Wednesday. One of the measures envisaged concerns the issue of green federal loans (“green bonds”).
These loans allow the issuer to raise funds on the capital market. Unlike traditional loans, the capital raised through green loans cannot be used freely.
They can only be used to finance projects with a positive impact on the environment: promotion of renewable energies, energy efficiency, maintenance of biodiversity or construction of environmentally friendly buildings.
The green bond market has experienced strong growth in recent years, in Switzerland and elsewhere. Public issuers play an important role in this regard, the government points out.
It is therefore necessary to create the bases that will allow the Confederation to also issue green funds. The issuance of these bonds aims to strengthen the application of international standards in Switzerland. The Federal Council thus hopes to encourage private sector players to also issue green bonds.
Attention, on their own, the green federal loans will not have a direct environmental impact, warns the government. Political decisions are needed in order to adopt concrete measures which will have direct effects for the protection of the climate and the environment.
A study published last June and sponsored by Greenpeace also fired red balls on the “green bonds”. It demonstrated that investments meeting environmental, societal and governance criteria (so-called “ESG” funds) hardly inject more money into a climate-virtuous economy than conventional funds.
“It appears that, overall, sustainable funds only demonstrate effectiveness in disengaging companies involved in major environmental controversies, and not in terms of improving the portfolio’s impact on climate and sustainability” , summarized the rating firm specializing in the ESG field Inrate.
The Federal Finance Administration will now have to create a framework, in collaboration with the Federal Department of the Environment. And submit it to the Federal Council by the end of 2022.

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