In an effort to combat greenwashing, the Financial Conduct Authority (FCA) is introducing a new set of measures that include sustainability labels for investment products and tighter regulations on the usage of terms such as “ESG,” “green,” and “sustainable.”
The regulatory body aims to instill confidence among consumers and firms regarding the sustainability attributes of various products. Sacha Sadan, the FCA’s director for Environment, Social, and Governance, remarked, "Greenwashing misleads consumers and undermines trust in all ESG products. It’s crucial for consumers to be assured that products claiming sustainability genuinely reflect those claims. Our proposed regulations will foster greater trust within this sector."
As part of its initiative, the FCA plans to implement three categories of certified sustainability labels for investment products. Additionally, a comprehensive anti-greenwashing rule will apply to all regulated firms to prevent misleading marketing practices.
The initial focus will be on UK-based funds and portfolio management. The consultation period for these proposals is open until January 25, 2023, with final regulations expected by mid-2023. Furthermore, the FCA intends to consult on extending these measures to include overseas products and periodically review and enhance the framework.
In related news, Finextra has announced its fifth Sustainable Finance Live conference and hackathon, set for November 29. For more details and registration, please visit the event page here.