FCA launches consultation on ESG labeling

Getting accurate labels on environmental, social and governance (ESG) investment products is fast becoming a priority for regulators around the world and, to that end, the U.K.’s Financial Conduct Authority (FCA) launched a consultation on its proposed approach.

In a discussion paper, the FCA sets out proposed criteria for classifying and labeling investments, with the aim of improving investors’ understanding of the sustainability features of products.

The paper also consults on possible disclosure requirements at both the product level and the asset manager level.

Based on the outcome of the consultation, the FCA is aiming to have formal rule proposals on the table by the second quarter of 2022.

“We want consumers to have enough information to assess which products meet their needs and hold firms to account for their sustainability claims,” the FCA said in its paper.

Alongside the consultation on product labeling and industry disclosure, the FCA also published a new ESG strategy — which sets out its role in the financial industry’s transition to a more sustainable economy.

“It is vital that we innovate to support industry’s shift to a more sustainable future,” said Nikhil Rathi, CEO of the FCA, in a release. “Developing consistent, trusted standards are a vital part of that, giving investors the confidence to put their money where it can deliver the most sustainable outcome.”

Separately, the regulator said that it will finalize new rules on TCFD-based disclosure standards for public companies, asset managers, life insurers and others by the end of the year.

In addition to its work in the asset management sector, the FCA is also committed to embedding ESG considerations across its own functions, and to enhancing its expertise in the area.

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.