This week, the FCA confirmed a package of measures it says will improve the trust in and transparency of sustainable investment products and minimise ‘greenwashing’. The FCA says the package will support the UK’s position as a world-leading, competitive centre for asset management and sustainable investment. And with an estimated $18.4 trillion of ESG-orientated assets now being managed globally, it’s easy to see the importance of tackling greenwashing (i.e. misleading green claims) in this sector.
The package announced by the FCA includes new Sustainability Disclosure Requirements and an investment labels regime. It comes after what the FCA describes as “detailed engagement with a range of stakeholders, including industry, other regulators and consumer groups.” It will also protect consumers by helping them to make more informed decisions when investing and enhance the credibility of the sustainable investment market. Research has shown that investors weren’t confident that sustainability-related claims made about investments were genuine. As is the case in other sectors, this is caused in part by the lack of consistency when firms use terms such as 'green', 'ESG' or 'sustainable'.
To tackle this issue, the FCA will introduce:
- An anti-greenwashing rule for all authorised firms to make sure sustainability-related claims are fair, clear and not misleading
- Product labels to help investors understand what their money is being used for, based on clear sustainability goals and criteria
- Naming and marketing requirements so products cannot be described as having a positive impact on sustainability when they don’t
We have created a Guide to the new regime, which is available here.
“By improving trust in the sustainable investment market, the UK will be able to maintain its position at the forefront of sustainable finance, and capture the benefits of being a leading international centre of investment.” Sacha Sadan, Director of Environmental, Social and Governance, FCA,