The Financial Conduct Authority (FCA) has unveiled new sustainability disclosure requirements to improve consumer trust and ensure claims aren’t misleading.
The new requirements – including anti-greenwashing rules and labelling regime – will protect consumers by helping them to make more informed decisions when investing and improve the credibility of the sustainable investment market.
The rules come as the financial watchdog’s joint executive director for enforcement, Therese Chambers said the FCA is “very keen” to tackle greenwashing.
Additionally, research has shown that investors weren’t confident that sustainability-related claims made about investments were genuine due to a lack of consistency when firms use terms such as ‘green’, ‘ESG’ or ‘sustainable’.
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FCA director of ESG Sacha Sadan said the authority is putting in a “simple” and “easy-to-understand” regime.
“This is a crucial step for consumer protection as sustainable investment grows in popularity,” Sadan added.
“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 rules include:
- 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.
Law firm Stewarts partner Elaina Bailes commented: “How much the rules will affect firms’ approaches to marketing sustainable financial products will play out next year once the rules come into force.”
“Though the FCA has published some clear examples of descriptions that may be problematic, the possibility of greenhushing remains, with firms not wanting to fall foul of untested rules and so playing down sustainability credentials out of an abundance of caution,” she added.
