The UK Financial Conduct Authority has proposed new measures to enhance consumer trust and improve clarity regarding claims of environmental, social and governance (ESG) sustainability. Consultation CP22/20 sets out the core elements of the proposed regime, and is focused on UK-based funds and portfolio management. The FCA’s proposals, detailed in Consultation Paper 22/20, “Sustainability Disclosure Requirements (SDR) and Investment Labels,” include:
- Restrictions on the use of sustainability-related terms in marketing and in the names of investment products;
- A general anti-greenwashing rule covering all regulated firms;
- Three categories of labels for sustainable investment products based on objective criteria:“sustainable focus,” “sustainable improvers,” and “sustainable impact”;
- Disclosures to consumers to clarify key sustainability-related features of investment products, and more detailed disclosures for institutional or other interested investors, and;
- A requirement that investment platforms and other investment product distributers make ESG labels and disclosures accessible and clear.
The consultation is open until January 25, 2023. The FCA will publish final rules on the subject in the first six months of 2023.