Greenwashing faces fresh curbs in UK regulator’s crackdown
The UK’s financial regulator has moved to clamp down on “greenwashing” with proposed restrictions on investment managers using terms such as “green” and “ESG” in fund marketing and a new set of consumer-friendly labels for sustainable investments.
Rules set out by the Financial Conduct Authority on Tuesday include using a set of three fund labels to distinguish types of “green” investing and imposing a higher burden on firms to back up marketing with evidence.
The FCA joins other financial regulators round the world in cracking down on greenwashing, whereby investment managers make unjustified environmental claims for their products. Complaints are rising that unsuitable fossil fuel investments are widely included in funds that are branded as sustainable and regulators want to ensure that individual investors know what they are buying.
The FCA has proposed helping investors navigate the world of green investing with the use of three fund labels. These would distinguish funds that: currently hold exclusively sustainable assets; those that encourage their holdings to become more sustainable over time; and those that are focused on having a positive, real-world impact.
Funds that do not fit the criteria for those labels will face limits on using green terminology such as net zero in their names or marketing materials.
Strategies that simply consider ESG as part of their investment approach, so-called ESG integration, do not meet the new standards of what can be considered sustainable.
Fossil fuels including coal, oil and natural gas, as well as nuclear power, will not be excluded under the FCA’s proposed rules but the regulator says managers will have to provide clear explanations of how these assets are suitable investments for sustainable funds.
This story originally appeared on: Financial Times - Author:Joshua Oliver
