FCA launches consultation on Sustainability Disclosure Requirements and investment labels

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26 Oct, 2022

The Financial Conduct Authority (FCA) has published Consultation Paper CP/22/20 'Sustainability Disclosure Requirements and investment labels'.

The consultation paper builds upon the FCA's previously published Discusion Paper, (DP 21/4), issued in November 2021, that sought initial views on Sustainability Disclosure Requirements for asset managers and certain FCA-regulated asset owners, as well as the sustainable investment labelling system.

The aim of the proposals is to ensure that consumers are provided with all of the information necessary to make informed investment decisions and ultimately to provide greater transparency, consistency and trust in the market for sustainable investment products.  The proposals attempt to clamp down on greenwashing by companies.  

The consultation specifically covers:

  • Sustainable investment labels to help consumers navigate the investment product landscape and enhance consumer trust.
  • Consumer‑facing disclosures to help consumers understand the key sustainability-related features of a product.
  • Detailed disclosures targeted at a wider audience (eg institutional investors and consumers seeking more information):
    • pre‑contractual disclosures (eg in the fund prospectus), covering the sustainability-related features of investment products.
    • ongoing sustainability‑related performance information including key sustainability-related performance indicators and metrics, in a sustainability product report.
    • a sustainability entity report covering how firms are managing sustainability-related risks and opportunities.
  • Naming and marketing rules restricting the use of certain sustainability-related terms in product names and marketing materials unless the product uses a sustainable investment label.
  • Requirements for distributors to ensure that product-level information (including the labels) is made available to consumers.
  • A general ‘anti‑greenwashing’ rule applied to all regulated firms which reiterates existing rules to clarify that sustainability-related claims must be clear, fair and not misleading.

The proposals relating to labelling and classification, disclosure and naming and marketing rules will apply to asset managers initially.  However the FCA is seeking views on expanding the scope to include FCA-regulated asset owners in respect of their investment products.  The proposals in the consultation paper focus on funds and portfolio management based in the UK.  The FCA intends to consult in due course on how the proposals may be applied to overseas funds.  Subject to the feedback received, the FCA intend to publish its final rules and guidance in a Policy Statement by the end of the first half of 2023.

Comments on the consultation are requested by 25 January 2023.

A press release and the full consultation paper are available on the FCA website.

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