Swiss government embraces ‘double-materiality’ in new TCFD requirements

Rules will be drafted for large companies in Switzerland

Switzerland has today confirmed it will introduce mandatory reporting requirements for large companies based on the recommendations of the Taskforce on Climate-related Financial Disclosures.

The rules will cover public companies, banks and insurers with 500+ employees – or those with more than CHF20m in assets or CHF40m in turnover. They will be drafted by the country’s Department of Finance for public consultation next summer. 

In another win for ‘double materiality’, Switzerland’s Federal Council said the rules must “not only include the financial risk that a company incurs as a result of climate-related activities, but also disclose the impact of the company's business activities on the climate and the environment”. This will ensure they are in line with the EU’s current thinking on ESG disclosures, but will set them apart from global rules expected to be developed by the International Financial Reporting Standards Foundation, which are set to focus strictly on risk to companies’ bottom lines. 

“Minimum requirements should ensure that disclosures are meaningful, comparable and, where possible, forward-looking and scenario-based,” the Council continued, adding that the rules should be introduced in 2024, covering the 2023 financial year. 

The Swiss Government consulted with business associations and environmental and consumer protection associations in May about the plans, and said “the parameters were welcomed by the vast majority”.

The Federal Council will introduce the reporting rules via an executive order, which will outline how they must be applied. 

The Council is also due to issue an executive order for ESG disclosures and due diligence, which relates to a Responsible Business Initiative (RBI) first proposed six years ago. After a series of negotiations and votes, Swiss Parliament agreed to adopt a counter-proposal to the RBI, which takes elements from the EU Non-Financial Reporting Directive, with the EU Regulation on Due Diligence for Conflict Minerals and the Dutch Child Labour Due Diligence Law.

 Today, the Council said that introducing the two intiatives through separate executive orders "should increase legal certainty".

This is not the first time Switzerland has brought in TCFD-based rules. Last May, financial regulator FINMA introduced mandatory TCFD reporting requirements for major banks and insurers in the country.