FINMA on Green Financial Centre and Greenwashing

Abstract

«Talk is Cheap» – and also subject to regulatory scrutiny: FINMA informs on its commitment to greening the financial system and to protect investors from greenwashing.

On November 3, 2021, the Swiss Financial Market Supervisory Authority FINMA (FINMA) published a press release and new guidance (Guidance 05/2021) on the topics of greening the financial system and preventing and combating greenwashing. The communications come in the context of the UN Climate Change Conference in Glasgow and the recent contribution of the Network for Greening the Financial System (NGFS) of which FINMA is a member.

Against the background of the NGFS Glasgow Declaration of November 3, 2021, FINMA’s press release highlights the following:

  • FINMA is strongly committed to continuing to implement the NGFS’ key recommendations and to include the integration of climate-related financial risks in its supervisory activities in a strategic, proportional and risk-based manner. FINMA, for example, states that it:
    • develops concepts to adequately supervise climate risk management by banks and insurers, and it expects these concepts to be implemented starting 2022;
    • engages in a dialogue on the proper management of climate-related financial risks and on developing «heat maps» to identify climate-related risks;
    • explores quantitative methods to measure climate-related financial risks together with the Swiss National Bank;
    • implemented specified disclosure requirements for climate-related financial risks in line with the recommendations of the Task Force on Climate-related Financial Disclosures; and
    • actively supports the Swiss Federal Offices in the implementation of NGFS’ recommendations.
  • FINMA is also addressing the risks of clients being deceived by exaggerated or misleading ESG claims, including in connection with investment products.

On the last point, FINMA simultaneously issued Guidance 05/2021 «Preventing and Combating Greenwashing». Therein, FINMA notes the growing demand for ESG products and the resulting growing number of financial products being labelled – or claiming to be – sustainable, green, social, etc. FINMA warns that there may be a risk that investors are misled about the true characteristics of the relevant financial products and services. In addition to the need to protect individual investors, FINMA also emphasizes the need to protect the reputation of the Swiss financial centre as a whole.

Guidance 05/2021 mainly focuses on three aspects: (1) descriptions/labels of Swiss collective investment schemes as being sustainable/green/ESG and whether these characteristics are actually ensured and appropriately disclosed; (2) additional organizational requirements for institutions that manage sustainability-related collective investment schemes, including adequate processes, expertise, strategies and tools; and (3) conduct at the point of sale for ESG-related financial products.

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