Greenwashing: when companies try to project a green image

Green is currently the on-trend colour in the Swiss financial centre: the business with 'sustainable' investments is booming. This begs the question as to how sustainable these investment products really are, and who should determine this. A study by Greenpeace Switzerland, for example, concluded that many of the financial products on offer have been 'greenwashed'.

What does greenwashing mean?

Greenwashing is when a company pretends that its business operations are sustainable in the environmental sector. For example, a bank might market itself as pursuing ecological goals, when in reality it does not take any concrete measures to actually achieve these goals. Greenpeace Switzerland sees particular deficits in investment funds that have been designated as sustainable: many products are no more sustainable than other investments and do not contribute towards mitigating the climate crisis. However, it should be mentioned that as greenwashing is a relatively new phenomenon with many possible interpretations, companies are not always being dishonest deliberately.

What are the consequences of greenwashing for financial service providers?

One of the aims of financial market legislation is to protect investors through increased transparency and a reduction in the asymmetry in information between financial service providers and investors. As such, financial service providers are obliged to inform their customers truthfully about the relevant investments. Failure to comply with obligations can lead to regulatory complaints to FINMA.

Furthermore, in the event of greenwashing, the Unfair Competition Act (UCA) may be breached, according to which any deceptive behaviour or conduct that is contrary to the principle of good faith, and which influences the relationship between providers and consumers, is unfair and therefore illegal. Banks also expose themselves to reputational risk if involved in greenwashing.

What measures can be taken to prevent greenwashing?

In Switzerland, visible efforts are being made by federations and politicians to strengthen the issue of sustainability and thus prevent greenwashing. The Swiss Bankers Association published guidelines for the inclusion of ESG criteria in the advisory process for private customers in June 2020. Also in June 2020, AMAS – then known as SFAMA Swiss Funds & Asset Management Association – published its recommendations for sustainable asset management together with Swiss Sustainable Finance (SSF).

By promoting transparency and disclosure, FINMA is also making a decisive contribution to the prevention of greenwashing. The revised circulars 2016/1 'Disclosure – banks' and 2016/2 'Disclosure – insurers' entered into force on 1 July 2021. On 3 November 2021, FINMA published its supervisory communication 05/2021 on preventing and combating greenwashing. In this, FINMA outlines its expectations and current practice related to the management of sustainability-related collective capital investments at fund and institutional level. It also warns financial service providers that offer sustainability-related financial products of potential greenwashing risks in the advisory process and at the point of sale. The Federal Council in its session on 17 November 2021 decided to further pursue transparency measures to prevent greenwashing and to strive to conclude industry agreements with financial market players in line with the Federal Council's decision of 26 June 2019.


If a provider of financial services wants to offer 'green' products and services, the issue of sustainability must be firmly anchored in the corporate structure, and the employees of the financial services provider must be aware of and trained in the topic. Then the issue of sustainability requires clear definitions, guidelines, processes and controls, as well as transparent reporting to the various stakeholders. Only appropriate organisation can prevent greenwashing.