The Financial Conduct Authority will force firms to prove their environmental, social and governance (ESG) claims under a fresh clampdown designed to flush out ‘greenwashing’ from the City.
In a statement today, the FCA said it would unveil a package of measures to improve the “trust and transparency of sustainable investment products” after a rush of firms to slap the label on their funds.
Under the new measures, the watchdog will introduce an “anti-greenwashing rule” for all firms within its remit to make sure sustainability claims are “fair, clear and not misleading”.
Guidelines around product labels will also be tightened and firms will be forced to rein in their green marketing tactics to ensure products cannot be described as “having a positive impact on sustainability when they don’t”.
“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,” said Sacha Sadan, director of ESG at the FCA.
The anti-greenwashing rule will come into effect from the 31st of May 2024. Firms will be allowed to use the new investment labels from 31 July 2024, and the naming and marketing rules for asset managers come into effect from 2nd December 2024.
The FCA is looking to clamp down on ESG claims in the City after a frenzy around the label over the past five years. Regulators globally are looking to tighten the rules around the products, with the EU rolling out stringent measures to force firms to rein in the claims.
The measures today mark a tightening of rules first laid out by the watchdog earlier this year.
Commenting on the new guidelines today, the UK Sustainable Investment and Finance Association said it was an “important moment in our industry’s efforts to build greater confidence” among retail investors.
“We believe that the new investment labels can address concerns often raised by savers over their funds’ sustainability claims and profile,” chief James Alexander, said.