FCA seeks to tackle greenwashing with new product labels

Alex Sword


The Financial Services Forum

The FCA has introduced measures aimed at increasing trust and transparency around sustainable investment products.

The regulator said that all FCA authorised firms will be subject to an anti-greenwashing rule, meaning sustainability-related claims must be fair, clear and not misleading.

There were also additional rules that will apply specifically to asset managers.

This includes four new product labels designed to help investors understand what their money is being used for against clear sustainability goals and criteria: Sustainability Impact, Sustainability Focus, Sustainability Improvers and Sustainability Mixed Goals.

Asset managers will also be subject to new naming and marketing requirements. Product names can reflect the sustainability characteristics of the product but will not be able to include words such as “sustainable”, “sustainability” or “impact”.

The FCA said that while it observes “significant” consumer interest in sustainable investments, these consumers find it difficult to identify products that meet their sustainability preferences.

“This is not helped by a lack of standardised, accessible information and the use of unclear or confusing terms”.

The anti-greenwashing rules will come into force on 31 May 2024, while the use of labels will apply from 31 July 2024. The naming and marketing rules will come into force on 2 December 2024.

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.”

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