City watchdog will expand investment rules against greenwashing

The city watchdog has launched proposals to extend sustainability rules to a wider range of investment products to tackle greenwashing.

The Financial Conduct Authority (FCA) announced new measures in November aimed at protecting retail investors by ensuring investment products and services accurately describe their sustainability objectives.

This included an anti-greenwashing rule requiring all companies to ensure claims are fair, clear and not misleading, which comes into effect from May 31.

The FCA has also announced the Sustainability Disclosure Requirements and labeling scheme for investment products, which aims to help customers understand what their money is being used for and that any claims can be backed up with evidence.

Both will come into effect for asset managers from July 31.

The FCA will also introduce a naming and marketing requirement for asset managers from December 2, which aims to ensure products cannot be described as having a positive impact on sustainability if they do not.

The watchdog announced on Tuesday that it is consulting on extending these measures to portfolio managers – firms that manage a diversified group of investments for consumers, meaning they would eventually apply to a wider range of products.

The consultations will conclude on June 14 and the final rules are expected to come into force in the second half of the year.

On Tuesday, the FCA also released guidance and examples to help firms comply with the new anti-greenwashing rule by May 31.

This includes advising companies to ensure claims are “clear and presented in an understandable way” and to “consider carefully whether they have the appropriate evidence to support their claims”.

The guidelines cite the example of a company making a promotional statement that an investment fund is ‘fossil fuel free’, but under the terms and conditions the fund includes investments in companies involved in the production, sale and distribution of fossil fuels from which income is earned. these activities are below a certain threshold.

The document said this would make the personal statement “factually incorrect” as the companies within the investment fund are not “fossil fuel free”.

Sacha Sadan, director of environment, social and governance at the FCA, said: “The confirmation of the new anti-greenwashing guidelines and our proposals to expand the sustainability requirements and investment label regime are important milestones that put the UK at the forefront of sustainable development. investment.

“Our examples of good and bad practices against greenwashing will help companies market their products properly.

“Consumers find it important to invest in products that have a positive impact on the planet and people. That’s why we want to increase the integrity of the market and ensure that people can make informed decisions about how to invest their money.”