The FCA has confirmed a substantial package of measures to improve the trust and transparency of sustainable investment products and minimise greenwashing.
With an estimated $18.4 trillion of ESG-orientated assets now being managed globally, the FCA is putting in place new Sustainability Disclosure Requirements and an investment labels regime after detailed engagement with a range of stakeholders, including industry, other regulators and consumer groups.
This package of measures, including the consumer-focussed labelling regime, will support the UK’s position as a world-leading, competitive centre for asset management and sustainable investment.
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. 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.'
The package of measures has consumers at its heart and was tested with over 15,000 people. It also follows our Financial Lives survey, which highlighted that a significant majority of adults in the UK would like to invest in a way that protects the environment and has a positive social impact.
Notes to editors
- PS23/16: Sustainability Disclosure Requirements (SDR) and investment labels.
- In October 2022, we consulted on a package of measures aimed at clamping down on greenwashing (CP22/20). The consultation closed in January 2023. As part of this work we carried out behavioural research including exploratory analysis, online experiments and qualitative research, published in Occasional Paper 62.
- In March 2023, we set out early feedback on our proposals and next steps.
- We have engaged with our expert Disclosures and Labels Advisory Group and other stakeholders, including industry and consumer groups.
- Our proposals support the delivery of the Government’s ambition for Sustainability Disclosure Requirements and labels, set out in the Roadmap to Sustainable Investing published in October 2021.
- In November, we published the findings of our Multi-Firm Review testing the embedding of ESG Guiding Principles. The review highlights good and poor practices we expect firms to address to meet the requirements of SDR.
- In addition to the other measures, all sustainable investment products will be required to disclose further information for investors. These disclosures will lead to greater transparency, as investors will have a comprehensive understanding of what exactly is included in their investment.
- The anti-greenwashing rule will come into effect from the 31 May 2024. Firms can use the investment labels from 31 July 2024. The naming and marketing rules for asset managers come into effect from 2 December 2024.
- The FCA is also setting up an independent working group for the financial advice industry to work together to build on existing capabilities in sustainable finance, including how the SDR and labels regime supports their role.
- Consumer webpage on identifying sustainable investments.
- Find out more information about the FCA.