Climate Governance Initiative


3 August 2023

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Sustainability, and environmental aspects in particular, are becoming increasingly important in Switzerland's legislation. In the past few years, there have been numerous legislative efforts aimed at reducing negative impacts on the climate and obliging companies to comply with certain due diligence and reporting obligations. On 27 January 2021, the Swiss Federal Council published Switzerland’s Long-Term Climate Strategy, which sets out a target of attaining net-zero greenhouse gas emissions by 2050.1

In December 2022, the Swiss Parliament passed the Federal Act on Climate Protection Goals, Innovation and Strengthening Energy Security (Swiss Climate Law).2 The Swiss Climate Law codifies Switzerland’s net zero target by 2050, and sets interim emissions targets of an average reduction of 64% over the period 2031-2040; a 75% reduction by 2040; and an average reduction of 89% over the period 2041-2050. The Swiss Climate Law requires companies to attain net zero direct and indirect emissions by 2050, and states that they may put in place transition plans to do so.3 The federal government is providing financial assistance to companies through 2030 for the application of novel technologies and processes to implement these transition plans.4 The Swiss Climate Law also requires the government to make effective contributions to aligning financial flows of Swiss financial institutions with low-emission development capable of resisting climate change.5 The Swiss Climate Law shall be implemented primarily through the Federal Act on the Reduction of CO2 Emissions (CO2 Act), which is currently in the process of being revised. While the Swiss Climate Law has been passed, it is yet to come into force. The Swiss People's Party has sought a referendum against the Act. 

In May 2021, the Swiss Financial Market Supervisory Authority (FINMA) introduced reporting obligations for large banks and insurance companies (supervisory categories 1 and 2) in line with the Task Force on Climate-related Financial Disclosures (TCFD), by amending its Circulars ‘Disclosure – banks’ (Circular 2016/1) and ‘Disclosure – insurers’ (Circular 2016/2).6 The revised disclosure rules require relevant financial institutions to: describe the main features of the entity’s governance structure to enable it to identify, evaluate, manage, monitor and report on climate-related financial risks; describe the major climate-related financial risks identified and their impact on the business model and strategy; describe risk-management structures in respect of such risks; and disclose quantitative information on their climate-related financial risks.7 The first disclosures on climate-related financial risks that were included in the banks and financial institutions’ annual reporting on the financial year 2021 have been analysed by FINMA. FINMA stated that “in most cases it is difficult for readers to get a clear idea of the effective relevance of the climate-related financial risks for the individual institution”.8 FINMA has proposed to conduct an ex-post evaluation after evaluating the second disclosures in 2023 and identify whether and to what extent future adjustments to disclosure practice are appropriate.

In December 2022, the Federal Council set out its position on greenwashing, stating that financial products or services labelled as sustainable must pursue a sustainability goal as well as their investment objective.9 It is expected that the Federal Council will propose new regulations on this topic after September 2023.

In January 2022, a revision of the Swiss Code of Obligations came into force, implementing new due diligence and reporting obligations for Swiss companies. This new law was introduced as a counter-proposal to the Responsible Business Initiative, which would have opened up Swiss companies to litigation in Swiss courts for alleged violations of human rights or environmental laws around the world. The new ESG reporting requirements are modelled after the EU Non-Financial Reporting Directive (Directive 2014/95) (cf. below section on directors' disclosure obligations). As outlined in EU section above, the rules set out in the EU Non-Financial Reporting Directive will be replaced by the EU Corporate Sustainability Reporting Directive. As a large part of the Swiss economy will be affected by these adjustments to the EU directive, the Swiss Federal Council assumes that there will be a need to adapt the Swiss ESG reporting obligations to the EU Corporate Sustainability Reporting Directive. On this background, the Swiss Federal Council has decided on 2 December 2022 to prepare a draft for an amendment of the Swiss ESG reporting obligations in line with the EU Corporate Sustainability Reporting Directive at latest until July 2024.10

In November 2022, the Swiss government published an ordinance, which specifies the climate-related reporting obligations for large Swiss companies (including listed companies, companies that have bonds outstanding, banks and insurance companies), being part of the ESG reporting requirements introduced with the aforementioned revision of the Swiss Code of Obligations.11 This ordinance provides for the implementation of the recommendations of the TCFD by large Swiss companies (cf. below section on directors' disclosure obligations). The ordinance comes into force on 1 January 2024.

Directors' Duties and Climate Change

The duties of the directors of Swiss companies are primarily governed by the Swiss Code of Obligations (CO). The legal provisions are supplemented by soft law, such as the Swiss Code of Best Practice.12

According to article 716a CO, the board of directors is inter alia responsible for the overall management of the company, the determination of the company's organisation, the organisation of the accounting, financial control and financial planning systems and the overall supervision of the persons entrusted with managing the company. In particular, the board of directors must define the company's strategy and ensure that the strategy is in the company's best interests and can be implemented with the resources available. The board of directors also needs to ensure that the company's risks are sufficiently identified, assessed and managed.

The members of the board of directors and third parties engaged in managing the company's business must perform their duties with all due diligence and safeguard the interests of the company in good faith (article 717 CO). If the directors intentionally or negligently breach their duties, they are liable both to the company and to the individual shareholders and creditors for any losses or damage arising from the breach of their duties (article 754 CO).

The law does not explicitly stipulate that directors must also take climate-related risks into account when determining the company's strategy and overseeing its risk management systems. However, in light of the developments mentioned above, in particular the widespread recognition by financial regulators that climate change poses material financial risks to business and the new ESG reporting requirements, it logically follows that directors must integrate climate risks and opportunities into their governance roles.

Directors' Disclosure Obligations and Climate Change

As explained at the outset, the revision of the Swiss Code of Obligations introduced as a counter-proposal to the Responsible Business Initiative came into force on 1 January 2022. The new provisions of the Swiss Code of Obligations provide for two new obligations. Firstly, large Swiss companies will be obliged to issue a general ESG report showing the risk of their business activities on environmental, social, labour, human rights and anti-corruption issues, as well as the measures taken against them. Secondly, companies with risks in the sensitive areas of child labour and so-called conflict minerals must comply with special and far-reaching due diligence and reporting obligations. The Federal Council has determined the details of these specific due diligence and reporting requirements in a new ordinance on due diligence and transparency in relation to minerals and conflict-affected areas and child labour (DDTrO).13 The new requirements will apply for the first time for the financial year beginning in 2023. This means that the first reports based on the new statutory ESG reporting and due diligence framework must be issued in 2024 with respect to the 2023 financial year.

The general ESG reporting obligation (Article 964a-964c CO) applies to companies of public interest domiciled in Switzerland that, together with controlled companies in Switzerland and abroad, (i) have at least 500 full time employees on average annually, and (ii) have assets of at least CHF 20 million or revenues of CHF 40 million in two consecutive years. Other than FINMA regulated financial institutions, companies of public interest include companies incorporated in Switzerland that are listed in Switzerland or abroad, have bonds outstanding, or contribute at least 20% of the assets or of the turnover to the consolidated accounts of such companies. However, companies that are controlled by a company to which the new reporting requirements apply, or that are subject to equivalent reporting under foreign laws, are not required to prepare an additional report.

While Swiss subsidiaries of foreign companies would usually not be listed on any stock exchange, the ESG reporting obligations may apply to such subsidiaries, if they have bonds outstanding, unless a direct or indirect parent company is subject to equivalent reporting obligations under foreign law, such as the EU Non-Financial Reporting Directive or the Corporate Sustainability Reporting Directive (on which, please see the EU section above).

The ESG report must include information necessary to understand the company's business and the impact of its activities on the environment (including CO2 targets), as well as societal concerns related to employees, respect for human rights and the fight against corruption across their value chains.14

As indicated at the outset, the ESG reporting requirement is modelled after the EU Non-Financial Reporting Directive, and the non-exhaustive list of topics that the report must cover tracks its model closely. Specifically, the report has to cover the following topics: 

  • the company's business model (Business Model);
  • the main ESG risks resulting from the company's own operations and, where relevant and proportionate, its business relationships, products or services (Risk Assessment);
  • the policies pursued to address these ESG risks, including due diligence applied (Policies and Due Diligence);
  • the outcome of these policies (Outcome); and
  • non-financial key performance indicators related to the company's response to ESG risks (KPIs).

If a company does not have policies addressing certain ESG risk areas, the report must include an explanation of the reasons for such a gap (comply or explain). The only defensible explanation that one could expect to see is an assessment that a company's activities do not raise concerns in a certain area.

The report may be based on national, European or international reporting standards, such as for example the OECD Guidelines for Multinational Enterprises15 or the standards of the Global Reporting Initiative (GRI).16 Further, companies may want to draw from guidelines the EU has issued on the methodology for reporting non-financial information.17 Under the above headings, these guidelines list out in detail the aspects that the ESG report should cover.

In addition, as stated above, the Federal Council has in the meantime specified the requirements for climate-based reporting in an ordinance.18 According to this ordinance, it is assumed that companies comply with their climate-based reporting obligations if they follow the recommendations of the TCFD as specified in Article 3 of the said ordinance. This assumption does not prevent companies from reporting on the impact of the climate on its business and the impact of its business' activities on the climate in other ways, in particular by relying on other guidelines or standards. However, in such a case, the company must specifically demonstrate that it meets the obligation to report on climate issues or explain why it has no policies addressing climate-related issues (on a comply or explain basis).

The report may be established in one of the Swiss national languages (i.e., German, French or Italian), or in English. It must be approved by the board of directors and the shareholders' meeting and made electronically accessible to the public for a period of 10 years. However, unlike the company's financial statements, there is no requirement for the ESG report to be audited.

Non-compliance with the new ESG reporting regime is subject to criminal liability. Non-compliance includes the inclusion of false statements in any of the newly-required reports, the generic ESG Report and the report on compliance with due diligence measures in the areas of conflict minerals and child labour, or the failure to issue any of these reports, or the failure to keep records of, or publish, these reports. If any of these acts are committed intentionally, the fine is up to CHF 100,000; if committed negligently, the fine is up to CHF 50,000.

In addition, deficient ESG due diligence or reporting may trigger civil liability under existing law, namely the liability of board members and management under article 754 of the Swiss Code of Obligations.

Practical Implications for Directors

In addition to our standing recommendation to develop and maintain a well-documented and effective general Compliance Program, we suggest that in response to the developments laid out in this note, board directors lend particular attention to the following points as a matter of priority:

  1. Review and where required adjust governance to ensure appropriate leadership at the board level in relation to climate-related risks, including adverse impacts the company's activities may cause and legal risks the company may face;
  2. Designate responsible function(s) to monitor and provide ongoing advice in relation to the increasing body of laws and regulations in the area of climate risk management requirements both in Switzerland and in their companies' markets abroad;
  3. Delegate climate risk identification and evaluation to a clearly identified team in management that reports directly to the CEO and board, and is charged with bringing together all key functions, including the Legal and/or Compliance function, Enterprise Risk Management, Strategic Planning, Audit, Remuneration, Human Resources, Investor Relations, Stakeholder Relations, etc.;
  4. Review and where required adjust climate-related risk management policies and processes across the company's supply chain and distribution network, including affiliates and third parties, on the basis of a solid risk assessment. In this regard, broaden and deepen the company's third party intermediary due diligence framework to address climate-related risk factors and do so into tiers 2 and 3 of their companies’ supply chains; and
  5. Review and where required adjust their reporting on climate-related risk factors and the measures they take to address these risks. Introduce internal assurance processes in relation to reporting. 


  • Corinne Nacht, Baker McKenzie Switzerland 
  • Philippe Reich, Baker McKenzie Switzerland
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End notes:

1: Federal Council, Switzerland's Long-Term Climate Strategy (27 January 2021) <>.
2: Federal Act on Climate Protection Goals, Innovation and Strengthening Energy Security <>.
3: Swiss Climate Law, article 5.
4: Swiss Climate Law, article 6.
5: Swiss Climate Law, article 9.
6: FINMA, FINMA specifies transparency obligations for climate risks (31 May 2021) <>.
7: FINMA, Circ. 16/1, ‘Disclosure – banks’ at [14.1], Annexure 5; FINMA Circ. 16/2, ‘Disclosure – insurers’ at [13]-[13.7]
8: FINMA, FINMA publishes guidance on climate risk disclosures (29 November 2022), <>.
9: Federal Council, The Federal Council's position on the prevention of greenwashing in the financial sector (16 December 2022) <>.
10: Federal Council, Sustainable corporate governance: Federal Council determines further course of action
11: Federal Council, Ordinance On Climate Disclosures, (23 November 2022) <>.
12: economieswisse, ‘Swiss code of best practice for corporate governance’ (2016) <>.
14: In addition to the generic ESG reporting obligation, the ESG legislation provides for further specific due diligence and reporting obligations related to so-called Conflict Minerals and related to child labour.
15: OECD, OECD Guidelines for Multinational Enterprises (2011) <>.
17: European Commission Communication, ‘Guidelines on Non-financial Reporting: Supplement on Reporting Climate-related Information’, 2019/C 209/1, (20 June 2019) <>.
18: Federal Council, Ordinance On Climate Disclosures, (23 November 2022) <>.