The U.K.'s Financial Conduct Authority finalized anti-greenwashing rules aimed at making sustainable investment products and marketing more transparent.
The "substantial package of measures to improve the trust and transparency of sustainable investment products" includes sustainability disclosure requirements and an investment labels regime, the FCA said in a Nov. 28 announcement.
The new labeling rules add a fourth category, "sustainability mixed goals," to cover multiasset and blended strategies, in addition to those labeled sustainable focus, sustainable improvers and sustainable impact.
The anti-greenwashing rules go into effect in May 2024, and the labeling rules apply in July 2024. Beginning in December 2024, asset managers marketing funds as sustainable will have to choose one of the four specific fund labels and demonstrate that it applies to 70% or more of the assets.
The FCA said that with $18.4 trillion of ESG-orientated assets now being managed globally, the new rules will protect consumers and help make the U.K. a competitive center for asset management and sustainable investment.
"By improving trust in the sustainable investment market, the U.K. will be able to maintain its position at the forefront of sustainable finance," Sacha Sadan, director of ESG for the FCA, said in the release.
The anti-greenwashing rule for FCA-covered firms is aimed making sure that sustainability-related claims "are fair, clear and not misleading," while those for product labels will help investors see "clear sustainability goals and criteria," and that names and marketing apply only to products with sustainable impact, the FCA said.
The move follows actions by the European Commission to improve transparency through Sustainable Finance Disclosure Regulation implementation that began in 2021.
In contrast to Europe's SFDR regime, the U.K.'s explicit rules "will support fund managers to categorize their funds and ultimately help end investors choose products that best match their sustainability preferences," said Tom Willman, regulatory lead at ESG compliance platform Clarity AI, in an email. The mixed asset label "goes a long way to remedying a structural issue with the initial regulatory proposal in covering mixed asset funds," he added.
James Alexander, chief executive of the U.K. Sustainable Investment and Finance Association, in a statement called the FCA actions "an important moment" in building trust in the sustainable investing market. Alexander urged FCA officials to engage with regulators in other markets to promote international harmonization.
