UK regulator widens net for sustainability disclosure rules
The FCA also issued guidance for its anti-greenwashing rules, which will come into force next month for all regulated firms
The UK’s financial services regulator said it wants to extend sustainability disclosure requirements for asset managers, due to begin from July 2024, to portfolio managers to ensure investment products labelled as sustainable can be backed up.
At the same time, the Financial Conduct Authority (FCA) issued guidance ahead of its new anti-greenwashing rule, which will apply to all regulated firms from 31 May 2024, to ensure financial services products and services described as sustainable, either for positive social impact or environmental benefit, are clear, complete and correct.
“We introduced the anti-greenwashing rule to clarify to firms that sustainability-related claims about their products and services must be fair, clear and not misleading,” the FCA said. “It gives us an explicit rule on which to challenge firms if we consider they are making misleading sustainability related claims about their products or services and, if appropriate, take further action.”
The guidance states firms’ sustainability claims about a product or service “should be correct and capable of being substantiated… Firms should not state or imply features of a product or service that are not true. Nor should they overstate or exaggerate a product or service’s sustainability or positive environmental and/or social impact.”
It added: “A firm’s products or services should do what they say they do. They should live up to the claims made, and firms should be able to support those claims with robust and credible evidence. Claims should be capable of being substantiated at the point in time at which they are made. Firms should think carefully about whether they have the appropriate evidence to support their claims.”
Regulated firms should regularly review sustainability claims, to ensure evidence remains relevant over time, the FCA said.
Extending the labelling and sustainability disclosure requirements to portfolio managers would introduce product labels that inform consumers how their money will be used to improve sustainability, as well as naming and marketing requirements so products can only be described as having positive outcomes on the environment or on society when those claims can be substantiated.
In a phased approach, UK-based fund managers will be able to use the investment labels from 31 July 2024 while the naming and marketing rules will take effect from 2 December 2024. The rules for asset managers were finalised in November 2023.
Sacha Sadan, director of environmental, social and governance at the FCA, said: “Consumers care about investing in products that have a positive impact on the planet and people. That’s why we want to boost the integrity of the market and ensure people can make informed decisions with their money.”