The Financial Conduct Authority (FCA) has proposed new rules to clamp down on greenwashing, targeting investment product sustainability labels and introducing restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used.
Back in August the FCA outlined ambitions to create a new advisory committee focused on environment, social, and governance (ESG) related issues, such as greenwashing.
The committee has found that there has been growth in the number of investment products marketed as ‘green’ or making wider sustainability claims and raised concerns that “exaggerated, misleading or unsubstantiated” claims about ESG credentials can damage confidence in these products and mislead investors.
As a result of this, The FCA is proposing to introduce restrictions on how sustainability-related terms can be used in product names and marketing for products which don’t qualify for the sustainable investment labels. It is also proposing a more general anti-greenwashing rule covering all regulated firms.
It also plans to introduce sustainable investment product labels and requirements for distributors to ensure labels and disclosures are accessible and clear to consumers. In addition, the FCA says it is stepping up its supervisory engagement on sustainable finance and enhancing its enforcement strategy.
“Greenwashing misleads consumers and erodes trust in all ESG products. Consumers must be confident when products claim to be sustainable that they actually are,” said Sacha Sadan, the FCA’s director of ESG, “our proposed rules will help consumers and firms build trust in this sector. This supports investment in solutions to some of the world’s biggest ESG challenges. This places the UK at the forefront of sustainable investment internationally. We are raising the bar by setting robust regulatory standards to protect consumers in line with our wider FCA strategy.”
