The Financial Conduct Authority (FCA) has announced a new package of measures to improve the transparency of sustainable investment products as the regulator looks to minimise greenwashing.

These measures, including the consumer-focused labelling regime, aim to support the UK’s position as a competitive centre for asset management and sustainable investment.

With an estimated $18.4trn of ESG-orientated assets now being managed globally, the FCA is putting in place new sustainability disclosure requirements (SDRs) and an investment labels regime after detailed engagement with a range of stakeholders, including industry, other regulators and consumer groups.

The package of measures was tested with over 15,000 people and follows the FCA’s Financial Lives survey, which highlighted that a significant majority of adults in the UK would like to invest in a way that protects the environment and has a positive social impact.

Research has shown that investors weren’t confident that sustainability-related claims made about investments were genuine, which the FCA suggested wasn’t helped by a lack of consistency when firms use terms such as “green”, “ESG” or “sustainable”.

To tackle this issue, the FCA intends to introduce an anti-greenwashing rule for all authorised firms to make sure sustainability-related claims are “fair, clear and not misleading”. The regulator also wants to create product labels to help investors understand what their money is being used for, based on clear sustainability goals and criteria.

Furthermore, the FCA aims to introduce naming and marketing requirements so that products can’t be described as having a positive impact on sustainability when they don’t.

“We’re putting in place a simple, easy to understand regime so investors can judge whether funds meet their investment needs – this is a crucial step for consumer protection as sustainable investment grows in popularity,” said director of ESG at the FCA, Sacha Sadan.

“By improving trust in the sustainable investment market, the UK will be able to maintain its position at the forefront of sustainable finance, and capture the benefits of being a leading international centre of investment.”

---