Sustainable Finance Regulation – Swiss Subsidiary Tradition in Light of Foreign Approaches

International agreements on environmental and social goals have been ratified but signatory nations, including Switzerland, are lagging. Catalysing financial flows towards sustainability to achieve these goals is necessary and regulations can be a helpful tool. Which regulatory approach can most efficiently support Switzerland in catalysing financial flows towards sustainability, considering its regulatory culture and parallel international developments?

Why regulate? Sustainable finance regulations target specific objectives focusing on different actors along the value chain of financial products and services. A comparison of regulation focusing on corporate actors across jurisdictions yields that most regulations aim to provide transparency on firms’ sustainability performance. At the financial-product level, regulation requires transparency on their sustainability characteristics and propositions of classification systems based on products’ sustainability characteristics are emerging. At the financial-service level, regulations focus on ensuring that clients’ sustainability preferences are met.

How are regulations applied? Approaches to sustainable finance regulation for achieving these objectives differ across jurisdictions, namely because of the national or regional regulatory tradition. While the European Union (EU) favours proactive market intervention in form of definitions for sustainable economic activities, to rapidly steer the economy, other jurisdictions, like the United States, set out regulations by selectively targeting specific actors along the value chain.

Where does Swiss sustainable finance regulation stand? Although the Swiss market is influenced by the EU’s holistic regulatory approach, the Swiss regulator has so far acted in a very focused manner with a lot of freedom for the industry.

This white paper sets the stage for the E4S Series on Sustainable Finance Regulation, by clarifying how actors along the financial value chain are targeted by regulations worldwide. The understanding of the Swiss regulatory tradition as well as international commitments and global parallel developments, is essential for discussions on further steps for sustainable finance regulation in Switzerland.