FCA reflects on the state of the sustainable investment product regime

What’s new?

The FCA has published a blog in which its Director of Sustainable Finance, Sacha Sadan, explores the package of measures introduced to enhance trust and transparency in sustainable investment products.

The new measures discussed include:

• Four product labels: to help investors understand the sustainability goals and outcomes of their investments
• Naming and marketing: ensuring products are accurately described in terms of their sustainability impact and
• Anti-greenwashing rules: ensuring sustainability-related claims are “fair, clear and not misleading”.

What does the blog say?

The labels regime was developed following discussions with fund managers, global regulators and industry stakeholders – these helped shape the new measures to ensure they are effective and aligned with international standards.

The discussions are also the reason for the FCA taking a non-prescriptive approach. While the regime has been built with flexibility in mind, this does mean there is room for interpretation which may lead to uncertainty. To support applicants, the FCA has set out a range of pre-contractual disclosure examples – see here.

Separately, a recent survey found that 81% of adults want their investments to positively impact the planet alongside financial returns. However, investors weren’t confident that sustainability related claims are genuine. As a result, naming and marketing requirements and anti-greenwashing rule have been introduced, which allow firms to change the description of their funds so consumers have access to more accurate information.

Next Steps

The FCA’s measures are part of a broader effort to support sustainable finance, including regulating ESG providers and creating a global language for sustainability.

The FCA believes a trusted market will result in strong consumer demand, fuelling growth in sustainable investment products and supporting the UK’s ambition to be a leader in sustainable finance.