Investor protection: preventing greenwashing

Demand for sustainable financial products and services from clients and investors has increased rapidly in recent years. This increases the risk that clients and investors will be misled about the sustainable characteristics of financial products and services (“greenwashing”). Investigations by FINMA also show clearly that greenwashing practices are observable in the distribution of financial products and services, and that providers often make vague or even misleading promises about their products. When it comes to preventing greenwashing, FINMA relies on general regulations in the absence of specific requirements governing the transparency of sustainability-related financial products and services.

The statutory provisions in Switzerland contain in particular a ban on deception with regard to collective investment schemes. Investors should also be able to make informed investment decisions about products marketed as sustainable. In the case of Swiss funds, for example, FINMA clarified the information that must be included in the documentation if funds are described as sustainable. In applications for product approvals, fund managers are asked for additional information on the sustainability targets pursued, their implementation and their intended impact. This enables FINMA to better assess whether there is deception and to intervene accordingly.

Overall, however, FINMA’s discretionary powers to efficiently prevent and avoid greenwashing are limited. For instance, there is a lack of specific sustainability-related transparency obligations and effective supervisory bases for taking action at the point of sale. Regulatory measures could give FINMA additional tools so that it can combat greenwashing on an even broader base and more effectively.