The FCA has unveiled a set of temporary measures for firms involved in sustainable investment, part of their broader SDR and investment labels regime.
As global assets in ESG-focused investments are projected to reach $34trn by 2026, these initiatives aim to fortify the UK’s stature as a leader in asset management and sustainable investments.
The newly implemented anti-greenwashing rule, effective since 31 May 2024, is part of a comprehensive package designed to guide investors through more informed decision-making and support the integrity of sustainability claims in investment products. As of 31 July, UK-based fund managers have started applying investment labels, indicating compliance with the new standards.
Despite the progress seen in firms adapting to these standards, the FCA acknowledges the challenges faced in meeting these stringent requirements. Some firms have indicated the need for more time to adjust product names and complete necessary disclosures for approval. In response, the FCA is providing limited temporary flexibility until 5 PM on 2 April 2025, for firms that show credible efforts towards compliance but are caught in exceptional circumstances.
“This additional time is granted to ensure that firms can thoroughly prepare and implement the changes needed without compromising the quality of their submissions,” said an FCA spokesperson. The flexibility applies specifically to funds that use terms like ‘sustainable’, ‘sustainability’, or ‘impact’ in their product names and are in the process of adapting these to the new regulations.
Firms are encouraged to comply with the ‘naming and marketing’ rules as soon as they are able, without relying on the extended deadline. The FCA stresses that this leniency does not apply to funds using other sustainability-related terms not specified in the guidelines.
The essence of the SDR is to prevent misleading representations in the marketing of sustainable funds. Under the new rules, a fund must genuinely pursue ESG/sustainability objectives that are substantial and integral to its strategy to justify the use of related terms in its name.
As the FCA continues to engage with the industry, providing support and pre-application consultations, it remains committed to assisting firms through transitions and ensuring the sector’s integrity.
For more detailed information on support for fund mergers, wind-ups, and terminations or other inquiries, firms are advised to contact their FCA supervisory contacts directly.
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