Watchdog unveils crackdown on ‘greenwashing’ products
THE City watchdog has launched proposals for extending sustainability rules to a wider scope of investment products to tackle ‘greenwashing’ where services deliberately exaggerate their sustainability credentials.
The Financial Conduct Authority (FCA) announced new measures in November aimed at protecting retail investors by ensuring the investment products and services accurately described their sustainability goals.
This included an anti-greenwashing rule requiring all firms to ensure claims are fair, clear and not misleading, which is set to come into force from May 31.
The FCA also announced the Sustainability Disclosure Requirements and investment product labelling system, which aims to help customers understand what their money is being used for and that any claims can be backed up by evidence.
Both are set to come into effect for asset managers from July 31.
The FCA will also introduce a naming and marketing requirement for asset managers from December 2, which aims to ensure products cannot be described as having a positive impact on sustainability if they do not.
The watchdog announced on Tuesday it is consulting on extending these measures to cover portfolio managers – firms that manage a diversified group of investments for consumers, meaning they would ultimately apply to a wider scope of products.
The consultation will close on June 14, with the final rules expected to come into force in the second half of the year.
On Tuesday, the FCA also released guidance and examples to help firms comply with the new antigreenwashing rule ahead of May 31.
This includes advising firms to ensure claims are “clear and presented in a way that can be understood” and to think “carefully about whether they have the appropriate evidence to support their claims”.
The guidance cited the example of a firm making a promotional statement that an investment fund is “fossil fuel free” but the terms and conditions say the fund includes investments in companies involved in the production, selling, and distribution of fossil fuels where revenue is below a certain threshold.
The document said this would make the personal statement “factually inaccurate” as the companies within the investment fund are not “fossil fuel free”.
Sacha Sadan, director of environmental, social and governance, 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 about how to invest their money.”