Guest Commentary by Sofia Jaccard

Strengthening the Sustainable Financial Sector through the Implementation of New Self-Regulations

3. October 2024
Client Reporting
ESG-Reporting
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Since September 1, 2024, new self-regulations have been in effect in Switzerland aimed at making the financial sector more sustainable. Banks and asset managers must now align at least 70% of their investments with sustainability goals and take their clients’ ESG preferences into greater account. These measures increase transparency and aim to prevent greenwashing, while transitional periods provide the industry with time to adapt.


New Self-Regulations for Sustainable Finance

With the entry into force of the new self-regulations by the Swiss Bankers Association (SBVg) and the Asset Management Association Switzerland (AMAS) on September 1, 2024, the commitment of financial service providers and asset managers in the area of “Sustainable Finance” has been significantly strengthened. Both self-regulations take the Federal Council’s position on combating greenwashing in the financial sector as the starting point for a coordinated definition of “compatibility” and “contribution” to achieving sustainability goals. Building on this, sector-specific regulations are established.

Sustainability Goals and Permissible Approaches

In the context of asset management, at least 70% of assets must now be compatible with sustainability goals or contribute to them in order to meet the sustainability requirement. Permissible sustainable approaches include, for example, thematic investments, climate alignment, or stewardship. With regard to the reference framework, the self-regulation allows for flexibility, permitting not only state-issued criteria but also industry practices or individually developed principles. However, there are limitations regarding the restriction to individual sustainability elements such as “exclusion” or “ESG integration,” which are insufficient to meet the intended sustainability requirement. These non-sustainable financial products must now be labeled as such in sustainability reporting. Finally, the self-regulation outlines sustainable investment approaches and provides examples of sustainability goals and product classifications.

Recording Sustainability Preferences at Banks and Training Employees on ESG Investment Solutions

Banks are required to record the sustainability preferences of their clients, appropriately consider these preferences in the investment solutions during the advisory process, and inform the clients accordingly. The Federal Council’s criteria for defining ESG investment solutions now explicitly apply to asset management mandates and investment advice. These criteria align with the definition from AMAS. Additionally, training programs on international and regulatory foundations, ESG investment solutions, sustainable investment goals, and ESG approaches are intended to enhance the skills and knowledge of employees.

Increased Accountability and Reporting Obligations

The accountability and reporting obligations have also been strengthened. In the case of sustainable asset management mandates, there is now an explicit requirement to report on the sustainable investment goals using specific indicators.

Advantages of Principles-Based Self-Regulation

The new principles-based self-regulations are to be welcomed, as they deepen the minimum standards for ESG characteristics as well as regulations on sustainability preferences and risks, thereby strengthening the sustainable financial sector. The clearer guidelines also contribute further to preventing greenwashing. In the future, clients will be able to make more informed decisions regarding the ESG quality of financial products, opening up new opportunities for the financial industry through the tailored provision of individual sustainable product solutions.

Impact on Sustainability Reporting

The self-regulations will have an impact on sustainability reporting at the product level for banks and asset managers. On one hand, the establishment of a minimum quota of 70% for compatibility and contribution to sustainability goals by AMAS necessitates corresponding disclosure and transparency. Furthermore, the increased consideration of ESG preferences in the investment process and client advisory will also heighten the need for transparent presentation in reporting.

Transitional Periods for Implementing the New Regulations

To gradually adapt to the new regulations, transitional periods apply: For AMAS, the initial implementation deadline is September 1, 2025, and for existing AMAS members, it is March 1, 2026. For SBVg, the training obligation must be met by January 1, 2026; implementation for new clients is required by January 1, 2026, and for existing clients by January 1, 2027.

Guest Commentary by Sofia Jaccard (LL.M), Senior Manager in the Sustainability and Strategic Regulatory Area at PwC

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