How can asset managers avoid greenwashing?

Principle-based provisions in Switzerland

As of 1 January 2025, Switzerland has introduced a targeted legal provision to combat greenwashing through Article 3 paragraph 1 letter x of the Unfair Competition Act (UCA). This new rule prohibits misleading climate-related claims in commercial communication. Specifically, any statement about the climate impact of a company, its products or services that cannot be substantiated by objective and verifiable evidence is deemed unfair. A key innovation is the reversal of the burden of proof: companies must now proactively demonstrate the accuracy of their environmental claims.

Greenwashing in asset management, more specifically, is also prohibited by law. Pursuant to the Swiss Collective Investment Schemes Act (CISA), the designation “collective investment scheme” must not provide any grounds for confusion or deception, in particular in relation to the investments. Moreover, the fund documents must be truthful.

In its Guidance 05/2021 on preventing and combating greenwashing, published on 3 November 2021, FINMA expresses its expectations in this context: on the one hand, regarding sustainability-related information at the fund level and, on the other hand, regarding a suitable organizational structure at institutional level for managing such products. In terms of fund level expectation, FINMA lists scenarios bearing high greenwashing risks. The examples range from obvious deception (e.g., the fund makes a reference to sustainability, although no sustainable investment strategy or policy is actually pursued) to vague statements (e.g., the fund makes a reference to sustainability by using terms such as “impact” or “zero carbon” without the stated impact or savings being measurable or verifiable). Regarding institutional level expectations, FINMA urges the integration of sustainability-related considerations into the existing corporate governance structures.

On 26 September 2022, the Asset Management Association Switzerland (AMAS) published a principle-based Self-regulation on transparency and disclosure for collective assets referring to sustainability (SR). Even though the self-regulation qualifies as independent, it imposes binding organizational, reporting and disclosure obligations for AMAS members launching and/or managing sustainability-related funds. The definition of the various investment approaches follows the Recommendations on Transparency and Minimum Requirements for Sustainable Investment Approaches and Products, jointly published by AMAS and the Swiss Sustainable Finance (SSF) in December 2021.

Since its initial publication in September 2022, the AMAS SR has undergone several amendments. Version 1.1 was released in November 2023, followed by version 2.0, which came into force on 1 September 2024, with various transition periods. Notably, version 2.0 introduced a formal requirement for independent assurance, mandating external verification of compliance with the self-regulatory framework as part of the prudential audit. The current version 2.1, dated 8 June 2025, reflects further refinements, particularly with respect to real estate funds. Following the release of SR 2.0, AMAS has published and regularly updated a Q&A document offering practical guidance on implementation and interpretation. The last update took place on 21 July 2025. A month prior, on 24 June 2025, detailed audit procedures were introduced, outlining amongst others the level of assurance, applicable assurance standards, the frequency of the assurance as well as management representations.

In June 2024, the Swiss Federal Council reaffirmed its support for industry-led initiatives by explicitly endorsing, among other things, the AMAS SR as an effective tool to prevent greenwashing. It concluded that this framework adequately reflects its position on sustainable finance and, for the time being, saw no need for statutory regulation at ordinance level. However, the Federal Council announced that this position will be reassessed by 2027 at the latest, taking into account the outcome of the SFDR revision and further international developments. Meanwhile, FINMA continues to play a supervisory role within the limits of its mandate. FINMA has repeatedly emphasized that its powers to prevent and combat greenwashing remain highly constrained, particularly due to the lack of enforcement tools. The regulator also criticized the absence of a level playing field, which hampers consistent supervision and investor protection across the financial sector.

Unlike the SFDR, the AMAS self-regulation does not foresee transparency obligations on sustainability-related matters for funds without sustainability reference. For instance, no sustainability reference prevails if the fund only applies exclusionary criteria that are already widespread or if the ESG integration approach merely assesses financial materiality, without there being a specific sustainability component going beyond this. In this case, the fund is not deemed “sustainable”. With this negative definition of sustainable funds, AMAS mirrors FINMA’s view on greenwashing risks.

The sustainability reporting duties require asset managers to disclose transparently, at least on an annual basis, how the defined sustainability goals have been reached by using comparable indicators. By means of reference to the EET in the EU, Swiss asset managers enjoy a considerable leeway with regard to the implementation of sustainable reporting duties. Only in case of real estate funds is the content defined, as asset managers must disclose the environmental indicators as set out in AMAS Circular 04/2022.

Trends and observations

Fund names and attributes such as “sustainable”, “green”, “ESG” and “impact” remain powerful marketing tools. An analysis by ESMA shows that adding ESG-related terms to funds’ names seems to significantly influence investor inflows, with increases of up to 8.9% over the first year. The most pronounced effect was observed in funds that added environmentally related terms to their names. However, the lack of a harmonized standard as to the “greenness” of funds continues to challenge transparency, comparability and legal certainty.

As of the second quarter of 2025, Article 9 funds represent only a small fraction of the EU fund market, with continued outflows for the seventh consecutive quarter. In contrast, according to the European Fund and Asset Management Association (EFAMA),  Article 8 funds account for over half of the market share, though inflows have slowed amid geopolitical and regulatory uncertainty. In response to the deadline of 21 May 2025 set in the ESMA Guidelines on funds’ names, asset managers have actively rebranded their products. According to Morningstar Sustainalytics¹, during the second quarter of 2025 alone, over 600 funds were renamed, including 382 that dropped ESG-related terms. Furthermore, the 80% investment threshold and exclusion criteria introduced by ESMA have led many managers to downgrade or reclassify their funds, with downgrades from Article 8 to Article 6 accounting for a significant portion of recent fund shifts. To a certain extent, the renaming reflects a trend of greenhushing – the deliberate underreporting or removal of sustainability claims to avoid regulatory scrutiny.

These developments highlight a cautious approach by asset managers, who are balancing investor expectations with evolving regulatory requirements. The market continues to adapt, and further reclassifications are expected as the SFDR revision and enforcement by national supervisory authorities gain traction. Despite the dynamic regulatory developments abroad, the Swiss regulator continues to take a reserved stance, opting to observe rather than proactively intervene. This wait-and-see approach reflects confidence in industry-led self-regulation, but also raises questions about long-term enforcement and market integrity.