The Financial Conduct Authority (FCA) is proposing a set of new rules as part of plans to “clamp down” on greenwashing.
The UK regulator said that the proposed measures would include investment product sustainability labels and restrictions on how terms like ESG, green, or sustainable can be used.
The UK watchdog said that there has been growth in the number of investment products described as ‘green’ or that make wider sustainability claims.
It warned that "exaggerated, misleading or unsubstantiated" claims about ESG credentials can damage confidence financial products.
The move comes days after the Advertising Standards Authority (ASA) banned two HSBC bus-stop posters which referred to the bank's investment in helping its clients reach net-zero and its tree-planting initiative.
The regulator received 45 complaints, including from Adfree Cities, which said that the advertisements were misleading because they “omitted significant information about HSBC’s contribution to carbon dioxide and greenhouse gas emissions”.
“Greenwashing misleads consumers and erodes trust in all ESG products. Consumers must be confident when products claim to be sustainable that they actually are,” said Sacha Sadan, FCA’s director of environment social and governance. “Our proposed rules will help consumers and firms build trust in this sector. This supports investment in solutions to some of the world’s biggest ESG challenges.”
The proposed rules also include consumer-facing disclosures to help consumers understand key sustainability-related features of an investment product, as well as more detailed disclosures which are suitable for institutional investors or retail investors that want to know more.
They would also require distributors of products, such as investment platforms, to ensure that the labels and consumer-facing disclosures are accessible and clear to consumers.
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