Greenwashing
The integrity of financial services and products is of vital importance to the Swiss financial centre. Customers rightly expect high standards of quality from Swiss-based financial service providers, and this of course also applies to financial products marketed as sustainable. The Swiss Bankers Association (SBA) is therefore opposed to all forms of greenwashing and takes steps of its own to preserve the Swiss financial centre’s credibility.
Greenwashing in the value chain
There are three areas of a bank’s operations that are susceptible to greenwashing:
- When a financial service provider positions itself as sustainable both internally and externally (e.g. on social media or in its advertising, statements of support or sustainability reports), but its internal business practices contradict the image it communicates.
- When false or misleading claims are made about a product or service’s sustainability credentials or its composition. Financial market law already sanctions false or misleading conduct. For example, the Financial Services Act contains provisions on liability (Art. 69 FinSA) and criminal provisions (Art. 90 FinSA) in relation to prospectuses and key information documents.
- Bank officers must ensure that environmental, social and governance (ESG) criteria are incorporated into their advisory processes, e.g. by regularly asking customers about their preferences and providing in-house training for staff, and that customers’ expectations regarding sustainability are adequately met. Failing to do so may constitute greenwashing.
Three types of greenwashing
There are various types of greenwashing which can arise in those areas of the value chain:
- The first is scientific. The science underlying sustainable finance is still in its infancy: it is heterogenous and far from settled. In particular, there is no consensus as to how the impact of financial products on ESG criteria should be measured, so it is still not easy to prove just how “sustainable” a given product is. This means that there are no precisely defined criteria an investment must meet in order to be labelled “sustainable”. Investors must therefore decide for themselves which criteria and practices are most important for their needs.
- The second relates to regulation. When selling and providing advice on financial products, key information such as risk, performance and liquidity must be taken into account. At the same time, investor protection and the product’s suitability for the customer must be assured. This can severely restrict small investors’ scope to achieve their sustainability goals. In practical terms, therefore, the investment universe available to this customer segment must incorporate sustainability characteristics but also be broadly based at all times.
- The third is “perceived greenwashing”, where the actual characteristics of an investment fail to live up to customer expectations, for example due to misleading marketing claims or poor quality of advice. This includes sustainability characteristics that do not match those a customer wants or expects. If, for example, an investment product uses sustainability indicators only to minimise financial risks or improve financial performance, it is fundamentally different from one that aims to contribute to achieving sustainability goals.
Greenwashing can be addressed by embedding sustainability into corporate strategy, focusing on clear and truthful product information, implementing the corresponding advisory processes, and staff training. This is essential – not least for the financial industry’s reputation. The overwhelming majority of providers take the challenge seriously and want to make a positive contribution.
SBA activities and measures
Creating credibility means providing transparent information and professional advice. The SBA therefore sees the advisory process as one of the areas with the greatest potential for eradicating greenwashing. It has made sustainability an integral part of customer consultations with the aid of two sets of self-regulation that are binding on all members. The new guidelines set out binding rules on integrating ESG criteria into investment advice and portfolio management, and for addressing energy efficiency when giving mortgage advice. By offering systematic training and professional development to staff, as well as providing professional advice and transparent communication about products and services, SBA member institutions can make an important contribution to avoiding greenwashing. The self-regulation was updated in 2024 to align it with the Federal Council’s goals.
Creating credibility means honouring your own commitments just as you expect others to. The SBA regards net-zero initiatives as an effective instrument for achieving the climate goals set for the year 2050. It is therefore a supporting institution of the Net-Zero Banking Alliance and recommends that its members sign up to international net-zero alliances and sustainability initiatives in the banking sector, such as PRI and PRB. By joining net-zero alliances, financial service providers undertake to set themselves climate goals, disclose their plans transparently and report regularly on their progress. Sustainability initiatives can help to achieve the scientific consensus necessary to preventing greenwashing.
Furthermore, the SBA is working with other associations on ways to achieve transparent disclosure. This is the only way to make sure that investors receive the information they need. That in turn enables truthfulness and clarity in product information and addresses customers’ expectations.
Partner associations’ activities and measures
The Swiss Climate Scores, which were developed under the auspices of the federal government and with the collaboration of experts from the sector and NGOs, create greater transparency regarding the Paris alignment of financial investments. The SBA joins the Asset Management Association Switzerland (AMAS) and Swiss Sustainable Finance (SSF) in welcoming these six indicators, which are based on existing, internationally established criteria and methods. Owing to a lack of data in certain areas and a need for further clarification, they are not currently applicable to all forms of investment. However, AMAS and SFF have produced aids to implementing the Scores.
Complementing the SBA’s self-regulation on sustainability in customer advice, AMAS has updated its self-regulation on transparency and disclosure for sustainability-related collective assets to align it with the Federal Council’s goals. Version 2.0 of the self-regulation introduces new and binding rules regarding the organisation of financial institutions that create and manage sustainability-related collective assets, as well as the information requirement for sustainability-related products.