FCA proposes anti-greenwashing rules

The U.K.’s financial regulator  is seeking to ensure truth in advertising when it comes to using terms such as “ESG,” “green” and “sustainable” in connection with investment offerings.

The Financial Conduct Authority’s (FCA) proposed anti-greenwashing rules would introduce restrictions on how sustainability-related terms can be used in product names and marketing materials; set new requirements for distributors to ensure that green labelling is clear and accessible; and adopt specific requirements for both consumer disclosures and more detailed disclosures for institutional or retail investors who want more information.

The proposals, which also feature a general anti-greenwashing rule covering all regulated firms, are out for comment until Jan. 25, 2023.

The FCA is seeking to finalize the new rules by mid-2023.

“Greenwashing misleads consumers and erodes trust in all ESG products,” said Sacha Sadan, director of ESG at the FCA, in a release. “Consumers must be confident when products claim to be sustainable that they actually are. Our proposed rules will help consumers and firms build trust in this sector.”

The regulator said the proposed new measures are among several potential new rules it’s considering to protect consumers and improve trust in sustainable investment products.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.