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FCA consults on sustainability disclosure requirements and “greenwashing” with investment labels
United Kingdom | Publication | November 2022
The FCA has published a consultation paper (CP22/20) on sustainability disclosure requirements (SDR) and investment labels, which follows a discussion paper (DP21/4) published in November 2021. The FCA received broadly positive feedback to this “anti-greenwashing” approach, which is summarised in the consultation paper.
The consultation details the FCA’s proposals to introduce:
- Sustainable investment product labels, aiming to give consumers the confidence to choose the right products. There will be three categories, including one for products improving their sustainability over time, underpinned by objective criteria.
- Naming and marketing rules. These will impose restrictions on how certain sustainability-related terms such as "ESG", "green" or "sustainable" can be used in product names and marketing for products which do not qualify for the sustainable investment labels. The FCA is also proposing a more general anti-greenwashing rule covering all regulated firms.
- Consumer facing product-level disclosures. These will help consumers understand the key sustainability-related features of an investment product. This includes disclosing investments that a consumer may not expect to be held in the product.
- Detailed disclosures. These aim to provide more granular information that is suitable for institutional investors or retail investors that want to know more.
- Requirements for distributors of products. These are to ensure that the labels and consumer-facing disclosures are accessible and clear to consumers.
The proposed rules are set out in a draft instrument contained in an appendix to the consultation paper. It is possible that this new regime for investment products may eventually expand into something similar for pension products, although the FCA recognises that there is more work to be done before this could be attempted.
The consultation closes on January 25, 2023. The FCA intends to publish final rules by the end of the first half of 2023. Following on from that, it proposes that the labelling, naming and marketing and initial disclosure requirements under the regime would not come into effect until at least June 30, 2024.
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