The UK’s Financial Conduct Authority (FCA) has announced it has finalised a “substantial package of measures” to target greenwashing.
With an estimated US$18.4tn of ESG-orientated assets now being managed globally, the FCA is implementing new Sustainability Disclosure Requirements and an investment labels regime after consulting with a range of stakeholders, including industry, other regulators and consumer groups.
The FCA says the measures, including a consumer-focussed labelling regime, will support the UK’s position as a “world-leading, competitive centre for asset management and sustainable investment.”
It is hoped the requirements will also protect consumers by allowing better-informed decision making and by making sustainable finance a more credible place to invest.
Research has shown that investors weren’t confident that sustainability-related claims made about investments were genuine. This isn’t helped by a 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
Sacha Sadan, Director of Environmental, Social and Governance, FCA, said: “We’re putting in place a simple, easy to understand regime so investors can judge whether funds meet their investment needs – this is a crucial step for consumer protection as sustainable investment grows in popularity.
“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.”
Read more on greenwashing from RiskBusiness here:
Greenwashing in finance: a closer look
