13-12-2023
The most important regulatory trends faced by Swiss financial institutions in 2024.
Sustainable Finance: Regulatory Outlook 2024
The 4th installment of our annual sustainable finance regulatory outlook shows that the regulatory framework in the EU is consolidating, while the wave of binding regulations is gathering pace in Switzerland.
Switzerland: Pioneering decisions in the pipeline
Just a few years after the EU, the age of mandatory ESG regulations is coming to Switzerland as well:
- From 1 January 2024 onwards, large public interest companies will fall under the reporting obligation of the Ordinance on Climate reporting. This will require extensive data gathering efforts throughout 2024. The report needs to be published for the first time in 2025 and available on the company website in two versions (one machine-readable and one human-readable).
- The Federal Departement of Finance will submit a consultation draft of revisions to CISO, FinSO and ISO to the Federal Council to address Greenwashing in financial markets by the end of August 2024 the latest. We expect a principle-based regulation that will be further detailed by revised versions of the ESG self-regulations of the Swiss Banking Association (SBA) and the Asset Management Association (AMAS) as well as a new self-regulation by the Swiss Insurance Association (SIA). For more on this subject, refer to our recent blog posts “The Federal Council addresses greenwashing – what now?” and “AMAS self-regulation – Lessons learned”.
- Finally, the new Federal Act on Climate Protection Goals, Innovation and Strengthening Energy Security was also adopted in 2023. We expect the consultation for the respective ordinance to start in early 2024. Financial institutions also fall under the general requirement to reduce Scope 1 and 2 emission to net zero by 2050. Further information can be found in our blog “Swiss companies need to develop a decarbonization plan” for more information.
- Although large public interest entities will be reporting for the first time under the new non-financial disclosure obligations of the Swiss Code of Obligations, their revision is already on the table. We expect the consultation to start in summer 2024.
- FINMA is planning several initiatives for 2024. The consultation for a new circular to introduce mandatory requirements around environmental risk management is planned for Q1. Additionally, FINMA will start to collect climate risk data from supervised institutions (categories 1 – 3) for the first time in 2024 to fulfill its own reporting obligations under the new climate act.
European Union: Refining existing frameworks
The European Union is putting more and more focus on refining the existing regulatory framework, while also tackling some new challenges in 2024:
- The EU Taxonomy framework takes another step forward. EU financial institutions will need to disclose on their FY23 Taxonomy alignment with reference to the initial climate delegated act and on Taxonomy eligibility with reference to the updated climate delegated act beginning of 2024. Additionally, they will need to report on Taxonomy eligibility on the remaining four environmental objectives covering FY23.
- 2024 will be the first CSRD reporting year for public interest companies under the NFRD scope. At the same time, the run-up phase for other large EU companies has started, as their first reporting year will be 2025.
- Greenwashing continues to be one of the most important topics on the EU agenda. In May 2024, we can expect the European Supervisory Authorities’ (ESAs) report on greenwashing, based on their common high-level understanding of the matter earlier this year. The European Commission (EC) also wants to take into account the increasting importance of data and rating providers in the area of sustainable finance and subject them to new, binding requirements. The draft text is already out and agreement on the final regime is expected by mid 2024 at the earliest, also refer to our blog on the subject.
- Although the SFDR only had limited time to prove itself, the EC has launched a targeted consultation on the future of the regugalotry regime and how it should be adapted best. The deadline for feedback is 15 December 2023, and we expect a response from the EC by mid 2024.
- Financial service providers have made a first attempt at implementing the MiFID II sustainability requirements in accordance with the guidelines released by the European Securities and Markets Authority (ESMA) from March 2023. ESMA has announced that it is closely monitoring these efforts and will most likely publish a report on best practices sometime in 2024. As the industry is currently struggling with this particular piece of regulation, this release will be one to look out for.
- The Directive on Corporate Sustainability Due Diligence (CSDDD) is expected to be adopted in early 2024. The aim of this Directive is to foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in companies’ operations and corporate governance. The current provisional agreement between the co-legislators foresees that the financial sector will be temporarily excluded from the scope of the directive, but there will be a review clause for a possible future inclusion of this sector based on a sufficient impact assessment.
- Additional topics on the EU’s sustainable finance agenda are the European Banking Authorities’ consultation on climate risk scenario analysis with a report later in 2024 or even 2025 and the voluntary EU Green Bond Standards that will become available around fall 2024.
Would you like to learn more about the regulatory challenges of 2024 in ESG?
View the recorded webinar «Navigating the ESG regulatory landscape: A look into 2024» below.
Timeline of the upcoming Swiss and EU sustainable finance regulatory milestones