FCA Targets Greenwashing with New Rules
The FCA has officially endorsed an extensive set of measures aimed at enhancing the reliability and transparency of sustainable investment products while minimising the prevalence of greenwashing.
Given the substantial global management of approximately $18.4 trillion in ESG-focused assets, the FCA has diligently collaborated with various stakeholders, including industry players, regulatory bodies, and consumer groups. This collaboration has resulted in the introduction of new Sustainability Disclosure Requirements and an investment labels system.
This comprehensive set of initiatives, which includes a consumer-centric labelling framework, is designed to reinforce the UK's standing as a leading and competitive hub for asset management and sustainable investment. Beyond this, it serves to safeguard consumers by empowering them to make more informed investment decisions and bolster the credibility of the sustainable investment market.
Recent studies indicate that investors often lack confidence in the authenticity of sustainability-related claims associated with investments. The problem is exacerbated by the inconsistent use of terms like 'green,' 'ESG,' or 'sustainable' by different firms.
To address this challenge, the FCA will implement:
An anti-greenwashing rule applies to all authorised firms to ensure that sustainability-related claims are fair, clear, and not misleading.
Product labels aimed at aiding investors in understanding the utilisation of their funds, based on explicit sustainability objectives and criteria.
Naming and marketing requirements prevent products from being described as having a positive impact on sustainability when they do not.
Sacha Sadan, Director of Environmental, Social, and Governance at the FCA, emphasised the significance of establishing a straightforward and easily comprehensible regime. This, according to Sadan, is crucial for consumer protection as the popularity of sustainable investment continues to rise.
The FCA's initiatives seek to bolster trust in the sustainable investment market, positioning the UK to maintain its prominence in sustainable finance and reap the benefits of being a leading global investment centre.
With consumers at its core, this set of measures underwent extensive testing involving over 15,000 individuals. It also aligns with the findings of the Financial Lives survey, which underscored a substantial desire among UK adults to invest in ways that contribute to environmental protection and positive social impact.
Source: FCA
