Swiss supervisor reviews bank climate disclosure and resilience

The Swiss Financial Market Supervisory Authority (FINMA), which oversees financial markets and the prudential regulation of banks, is considering new regulations to improve sustainability disclosure and is studying the impact of climate change on Switzerland’s banking sector.

According to a release, FINMA is currently “reviewing approaches for improved disclosure of financial climate risks by major financial institutions”.

A pilot study looking at the climate transition risks faced by two major unnamed banks is also underway as part of attempts by FINMA to assess whether such risks are adequately addressed by financial institutions. Transition risks include policy changes, technological advances and shifting consumer preferences driven by climate change.

FINMA said it is also addressing cases of ‘greenwash’ or the use of “exaggerated or misleading claims about ‘green’ properties” in the selling of investment products.

It confirmed that it is currently providing technical expertise to a national working group on sustainable finance, headed by the State Secretariat for International Finance, which is developing a strategy to increase Switzerland’s competitiveness in the area. The group is also assessing the impact of the EU’s Action Plan on Sustainable Finance on the Swiss financial industry.

The announcement comes days after the release of a report examining potential regulatory measures to support sustainable finance by the Federal Council – which represents the Swiss federal government.

A subsequent proposal on the legal measures to be taken forward has been commissioned by the Federal Council, and will be submitted by the end of the year.

Separately, a public initiative to hold Swiss companies legally accountable for actions committed in their operations and supply chains may have fallen flat after the Federal Council endorsed a watered down counter-proposal.

A constitutional amendment tabled by the Responsible Business Initiative would see Swiss-based companies held accountable for human rights abuses and environmental violations committed anywhere in the world, if passed. The proposals are scheduled to go to a binding public referendum, which could happen as early as November, under the country’s direct democracy system.

If rejected, counter proposals endorsed by the Federal Council in June – which remove the legal liability element and water down the due diligence requirements of the original proposal – will come into force instead.

Critics say the original proposals would encourage a flood of lawsuits and set unrealistic standards for corporate behaviour, particularly for Swiss companies used to a business-friendly regulatory approach, while supporters say that it would make Switzerland a leader on ethical corporate conduct at a time when scrutiny on the topic is at an all-time high from both investors and society at large.