Measures being considered include product labels that certify sustainable investment, with three categories measuring sustainability over time, and restrictions on the use of terms such as ‘green’, ‘sustainable’ and ‘ESG’ in marketing literature. Detailed disclosures on investments could be made available for institutional investors and retail investors who want to know more, while consumer-facing disclosures would provide information on the key sustainability-related features of an investment product. The FCA would also introduce a general ‘anti-greenwashing’ rule for all regulated firms.
Sacha Sadan, the FCA’s director of environment social and governance (ESG), said: ‘Greenwashing misleads consumers and erodes trust in all ESG products.
‘Consumers must be confident when products claim to be sustainable that they actually are. Our proposed rules will help consumers and firms build trust in this sector. '
James Alleyne, legal director in the financial services regulatory team at Kingsley Napley, said: ‘These proposed new rules clearly demonstrate that the FCA is putting ESG issues at the heart of its consumer protection strategy.
‘They will not only assist consumers in making effective ethical investment decisions but will also provide the FCA with the necessary regulatory infrastructure to take decisive supervisory and enforcement action against firms which seek to mislead about sustainability.
‘Regulated firms will likely have until mid-2023 to get their house in order but would be advised to start implementing these standards as soon as possible if they want to follow best practice in sustainable investing and avoid other potential legal and regulatory consequences.’
The FCA consultation, ‘Sustainability disclosure requirements (SDR) and investment labels’ (CP22/20), published last week, ends on 25 January, with the new rules due to be published by the end of the first half of 2023.
