By Huw Jones
LONDON (Reuters) – Britain’s financial watchdog will require all firms it regulates to stop greenwashing or making misleading climate-friendly claims on retail products from savings accounts to mortgages under a landmark rule coming into force in May next year.
While trillions of dollars globally have flowed into investments touting their sustainability, regulators are having to play catchup by issuing disclosure rules to punish greenwashing more easily.
The Financial Conduct Authority (FCA) has already held a public consultation on its Sustainability Disclosure Requirements (SDR) and published final rules on Tuesday with tweaks after industry concerns that too many funds would have to lose their sustainability label.
The new general anti-greenwashing rule requires all financial firms to make sure that their labelling is fair, clear and not misleading.
“This rule allows us to challenge firms if we consider they are making misleading claims about their products or services and, if appropriate, take further action,” the FCA said.
It will be supplemented with four new product labels for retail investors that can be used from July 2024. Asset managers must apply marketing and naming rules from December 2024.
The watchdog had initially proposed three product labels to cover various levels of sustainability, but has now added a fourth “mixed goals” label to cover products that include diverse strategies, though a minimum of 70% of assets under all four labels must be sustainable.
This additional label increases the number of funds covered to 630 from 450 originally.
The UK Sustainable Investment and Finance Association said the new rules address investor concerns, and that adding a fourth “mixed” label recognises the important role of multi-asset funds.
The FCA also opened a public consultation on guidance to apply the anti-greenwashing rule.
“Ultimately, we expect that firms’ sustainability-related claims about their products and services should live up to what they are claiming, and firms should have the evidence to back them up,” it said.
The UK regime is similar to rules the European Union has already introduced for asset managers, prompting many of them to reclassify funds totalling 175 billion euros ($191.71 billion)from the highest sustainability classification.
“As our regime is among the first to consider introducing investment labels, we stand ready to work with the EU authorities on this important issue,” the FCA said.
The watchdog said it was still considering how to apply the rules to overseas asset managers that offer products in Britain, and in the medium term will consider extending the new rules to pension products.
($1 = 0.9128 euros)
(Reporting by Huw Jones; Editing by Frances Kerry)