New anti-greenwashing rules confirmed for green and sustainable funds in UK
Published: 14:00 28 Nov 2023 GMT
All investment funds portrayed as green and sustainable will need to conform to new "anti-greenwashing" rules from next summer, which the UK financial watchdog is introducing to try and improve trust and transparency between private investors and the fund industry.
The final form of the anti-greenwashing rule is yet to be finalised, but overall it will require that sustainability-related claims must be clear, fair and not misleading, the Financial Conduct Authority (FCA) said, and will be applicable to all regulated firms.
Four new investment labels will come into effect from 31 May 2024 and fund managers will be able to use the investment labels from 31 July.
This follows a consultation by the FCA that ran from last October to January, with the new package of measures tested with more than 15,000 retail investors.
Product labels will help investors understand what their money is being used for, based on clear sustainability goals and criteria, the FCA said in a statement.
The four labels are ‘Sustainability Impact’ (for funds that invest in activities to achieve a real-world impact), ‘Sustainability Focus’ (funds that invest mainly in assets that are considered to be sustainable for the environment and/or society now), ‘Sustainability Improvers’ (investments in activities that are on a path to improving their sustainability for the environment and/or society over time) and ‘Sustainability Mixed Goals’ (for a mix of the above).
Products will not be able to say they have a positive impact on sustainability if they do not do so, it added. When the consultation was launched, the FCA said the reason was sparked by the fast growth in recent years of the number of investment products marketed as ‘green’ or making wider sustainability claims, with "exaggerated, misleading or unsubstantiated claims about ESG credentials" often damaging confidence in legitimate products.
Independent research has found that hundreds of supposed ESG funds potentially had not invested in anywhere near enough sustainable investments to qualify for their label.
