23 April 2024 , 14:58
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The City watchdog is set to extend its sustainability rules to a broader range of investment products in an effort to combat greenwashing.
The Financial Conduct Authority (FCA) unveiled new measures last November, aimed at safeguarding retail investors by ensuring that investment products and services accurately portray their sustainability objectives. This included an anti-greenwashing rule, due to come into effect from May 31, which mandates all firms to ensure their claims are fair, clear, and not misleading.
The FCA also introduced the Sustainability Disclosure Requirements and an investment product labelling system, both set to be implemented for asset managers from July 31. These initiatives aim to help customers understand where their money is being invested and ensure any claims can be substantiated with evidence.
From December 2, the FCA will also enforce a naming and marketing requirement for asset managers, ensuring products cannot be marketed as having a positive impact on sustainability if they do not. On Tuesday, the watchdog announced it is considering extending these measures to portfolio managers, meaning they would apply to a wider range of products.
The consultation will conclude on June 14, with the final rules expected to be enforced in the second half of the year. On Tuesday, the FCA also issued guidance and examples to assist firms in complying with the new anti-greenwashing rule before May 31.
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This includes advising firms to guarantee that claims are "clear and presented in a way that can be understood" and to "think carefully about whether they have the appropriate evidence to support their claims." The guidance cited the example of a firm making a promotional statement that an investment fund is "fossil fuel free" but the terms and conditions say the fund includes investments in companies involved in the production, selling, and distribution of fossil fuels where revenue earned from those activities is below a certain threshold.
The document stated that this would make the promotional statement "factually inaccurate" as the companies within the investment fund are not "fossil fuel free." Sacha Sadan, director of environmental, social and governance at the FCA, said: "Confirming the new anti-greenwashing guidance and our proposals to extend the Sustainability Disclosure Requirements and investment labels regime are important milestones that maintain the UK's place at the forefront of sustainable investment."
He added: "Our good and poor practice anti-greenwashing examples will help firms market their products in the right way. Consumers care about investing in products that have a positive impact on the planet and people. That's why we want to boost the integrity of the market and ensure people can make informed decisions about how to invest their money."