The Financial Conduct Authority (FCA), the UK’s financial watchdog, has released its new Sustainability Disclosure Requirements (SDR) for asset managers and investment labels rules, as reported by ESG Today on November 28. The SDR includes an anti-greenwashing rule for all FCA-authorized firms to ensure their sustainability-related claims are fair, clear, and not misleading. In addition, the FCA also introduced a consumer-focused labeling system designed to help investors understand what their money is being used for, based on clear sustainability goals and criteria. The FCA rules intend to enhance trust and transparency in sustainable investment products and avoid greenwashing risks.

Acknowledging the lack of consistency in terminologies such as ‘green,’ ‘ESG,’ or ‘sustainable,’ the FCA is determined to standardize and clarify the use of these terms. Under the naming and marketing requirements entailed in the SDR, sustainability-related terms can only be used in product names and marketing if the corresponding label is adopted. Furthermore, large-scale companies using these labels for their investment products will be subject to ongoing product-level disclosures from December 2025, and a year later for smaller firms. Sacha Sadan, the Director of ESG at the FCA, emphasized the importance of creating a straightforward and easily understandable regulatory framework for investors. Considering the increased popularity of sustainable investments, the move is a crucial step for consumer protection, Sadan added.

Sources:

https://www.esgtoday.com/fca-releases-anti-greenwashing-and-sustainable-investment-product-rules/

https://www.fca.org.uk/news/press-releases/sustainability-disclosure-and-labelling-regime-confirmed-fca

https://www.reuters.com/world/uk/uk-clamp-down-financial-firms-greenwashing-may-2024-2023-11-28/