Swiss banks push for self-regulation as government tackles greenwashing
SWITZERLAND’S banking sector, accused by critics of not doing enough to prevent so called “greenwashing”, is pushing to keep regulating itself ahead of a decision that could lead to government oversight of sustainable finance.
Greenwashing involves an organisation making misleading sustainability-related claims to investors or consumers, usually to boost its reputation and bottom line. However, there is no legal definition of the term in Switzerland.
“The Cabinet will give information this autumn on the further procedure in the matter of greenwashing,” a spokesman for the Swiss Ministry of International Financial Affairs told Reuters ahead of a decision on whether to introduce state regulation.
The Swiss Bankers Association (SBA), which represents lenders like UBS and Julius Baer as well as the country’s smaller banks, wants to continue with self-regulation rather than be subject to tighter government rules.
But some say self-regulation does not go far enough.
“The financial industry argues that self-regulation is effective because it can be implemented and adapted quickly,” said Stephan Kellenberger of the World Wide Fund for Nature (WWF), Switzerland.
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But he said self-regulation often lacked tough targets and did not prevent greenwashing. “It is indispensable that sustainable products, for example, meet the requirements of the Paris climate targets.”
Regulators say greenwashing undermines the credibility of efforts to tackle climate change and other environmental problems.
The number of instances of greenwashing by banks and financial services companies around the world rose 70 per cent in the past 12 months, according to RepRisk, a Swiss environmental, social and corporate governance data provider.
Switzerland, a huge centre for asset and wealth management, accounted for sustainable investments totalling around 1.6 trillion Swiss francs (S$2.5 trillion) in 2022, according to Swiss Sustainable Finance (SSF), an industry association.
There are no figures on Swiss cases of greenwashing.
Hans-Ruedi Mosberger, head of asset management and sustainable finance at the SBA, does not think there are any cases of “deliberate deception”.
“This is more a case of misunderstanding, a communication problem,” he said.
The SBA issued rules earlier this year on what advice can be given to clients around sustainable investments.
UBS, the country’s biggest bank with US$5.5 trillion in invested assets, also supports self-regulation, saying it sets a “minimum standard”.
For now, Switzerland’s approach runs counter to that taken by the European Union, Britain and Singapore where government enforcement has been adopted, experts have said.
“There is a wave of regulation coming to Swiss banks...it will really hit (them),” said Daniel Schmid Perez of banking consultancy ZEB, who estimates the total cost for lenders to adjust their processes would be around 100 million to 200 million francs. REUTERS
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