The UK’s financial watchdog has unveiled new guidelines and measures to tackle misleading and exaggerated ESG claims, as part of its efforts to clamp down on greenwashing and improve trust in the market for sustainable investments.
According to a statement released by UK's Finance Conduct Authority (FCA), the measures include an anti-greenwashing rule for all authorised firms to ensure fair and clear sustainability-related claims, new product labels to help investors understand what their money is being used for, as well as naming and marketing requirements to make sure products will not be described as “sustainable” when they don’t.
These guidelines also come in line with the British government's ambition to apply sustainable disclosure requirements in all sectors and its target to reach net zero by 2050. The final form of the anti-greenwashing rule is yet to be finalised but it is set to be in effect from 31 May 2024.
Four new product labels will be available for use from 31 May 2024 and fund managers will be able to use the labels from 31 July 2024. The new naming and marketing requirements will come into effect from 2 December 2024.
The anti-greenwashing rule applies to all FCA-authorised firms which make sustainability-related claims about their products and services. Meanwhile, the investment labels, disclosure, and naming and marketing rules apply to UK asset managers.
There have been introduced targeted rules for the distributors of investment products to retail investors in the UK. However, the rules do not apply to portfolio management products and services yet.
The FCA added it will work with the Sustainable Finance Disclosure Regulation (SFDR) in the European Union and other jurisdictions to encourage interoperability and compatibility.
"We have been concerned that some firms may be making misleading or exaggerated sustainability-related claims about their investment products[...]The regime should help underpin the UK’s position as a world-leading competitive centre for asset management and sustainable finance,"said Sacha Sadan, director of the Financial Conduct Authority’s (FCA) environmental, social and governance unit.
“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," she added.
Sadan added that 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.
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