Finma steps up the fight against cheating: The new evil in the financial industry, greenwashing

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It was a decision that was noticed outside of Switzerland as well. The “Frankfurter Allgemeine Zeitung” wrote “a condemnation of Fifa” this Thursday because the world football federation had “falsely” declared that the 2022 World Cup in Qatar would be climate neutral. A total of six environmental organizations had accused Fifa of making exaggerated statements about the CO₂ neutrality of the big event in the desert state.

It is one of the first greenwashing decisions made by the Swiss Lauterkeitskommission (SLK), the self-regulatory body of the communications industry. Like a court, SLK cannot fine or convict those responsible, it can only make recommendations or reprimand. From this point of view, the governing body of world football led by Gianni Infantino (53) escaped with a black eye. Image damage persists.

It doesn’t always stay like this. It was shown in Germany last year how drastic measures the authorities can take. Police and prosecutors searched the companies’ offices in Frankfurt am Main after an informant filed green-laundering claims against Deutsche Bank and its funding subsidiary, DWS. Shares of financial giants briefly fell close to five percent. Just two days later, DWS boss Asoka Wöhrmann (57) was forced to leave his post. She is one of the first executives to lose her job due to greenwashing allegations. This shows that greenwashing is no longer a minor crime.

Finma President wants “effective tools”

In Switzerland, too, authorities are increasingly taking action against green laundering, albeit with rather blunt means. “Overall, FINMA’s scope of action to effectively prevent and prevent green laundering is limited,” says a report released by the authority in late 2021. Open. As Finma President Marlene Amstad (54) has repeatedly stressed, it has been weak for months “for new effective tools”.

But even with today’s toolbox, the authority has ways to counteract greenwashing. The focus here is to protect customers and investors from fraud. It’s also taking action: It has conducted a total of 18 so-called on-site audits of fund companies and asset managers since 2021, when green laundering first hit the radar, as Finma reported on demand.

In 2023, the authority also carried out so-called point-of-sale checks for the first time. According to the official, three checks have been carried out so far in 2023 such customer advice centers. Finma conducted over 40 fund analyzes based in part on cues from the press. It also checks the sustainability reports of all Swiss property funds. It is not known whether Finma has imposed sanctions and which sanctions.

The fight against green laundering thus soon became an important task of financial control. For comparison: Finma conducted a total of 48 checks in connection with money laundering in 2021 and 2022. In the crypto space, three and five on-site inspections were carried out in 2021 and 2022, respectively.

Greenwashing – a steep career

Greenwash is a term that has had a meteoric rise in recent years. An assessment shows that greenwashing was mentioned in more than 2,400 media reports in Switzerland last year. In 2020, the Swiss media database counted 437 entries. There were only 24 articles on greenwashing in 2016.

Many articles deal with finance and investment topics. The financial sector has started to sell green-labeled products in recent years. These products are usually marked with a three letter ESG. They represent environmental, social, governance, i.e. environment, society and good corporate governance. Use of this letter combination has exploded in recent years: in 2016, the database counted 114 ESG entries. In 2022 there were already 2500 entries. So there seems to be an interaction between ESG and greenwashing.

Source :Blick