FCA announces new sustainability disclosure and labelling regime

The FCA has announced several new measures aimed at improving the trust and transparency of sustainable investment products and minimise greenwashing.

With an estimated US$18.4trn of ESG-orientated assets now being managed globally, the FCA is putting in place new sustainability disclosure requirements and an investment labels regime, following engagement with a range of stakeholders, including industry, other regulators and consumer groups. The steps include a consumer-focussed labelling regime and aim to support the UK’s position as a competitive centre for asset management and sustainable investment. It has also been devised to protect consumers by helping them to make more informed decisions when investing and enhance the credibility of the sustainable investment market.

Among the FCA measures are an anti-greenwashing rule for all authorised firms to make sure sustainability-related claims are fair, clear and not misleading. There will also be product labels to help investors understand what their money is being used for, based on clear sustainability goals and criteria, as well as naming and marketing requirements so that products cannot be described as having a positive impact on sustainability when they do not.

Sacha Sadan, director of environmental, social and governance at the 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 anti-greenwashing rule will come into effect from the 31 May 2024. Firms can use the investment labels from 31 July 2024, while the naming and marketing rules for asset managers come into effect from 2 December 2024.

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