Post by account_disabled on Feb 18, 2024 2:18:57 GMT -8
In a bid to clamp down on greenwashing – a term that refers to when an investment or company claims to be environmentally friendly but is not – the Financial Conduct Authority ( FCA ) ) in the UK has proposed a package of new measures including sustainability labels on investment products and restrictions on how terms such as 'ESG', 'green' or 'sustainable' can be used.
The measure is due to the fact that, given the growth in demand for investments based on environmental, social and governance (ESG) criteria, an increase in sustainable terms has been detected in packaging and investment products. The financial regulator notes that exaggerated, misleading or unsubstantiated claims about ESG credentials damage sustainability efforts and fracture trust in these products.
Measures launched to protect consumers from greenwashing
The proposed new regulation will protect consumers and improve confidence in sustainable investment products. The FCA is proposing to introduce sustainable investment labels which it says will give consumers the confidence to choose the brands that are right for them.
Sacha Sadan, Director of Environment, Social and Governance at the FCA, said: “Greenwashing misleads consumers and erodes trust in all ESG products. "Consumers need to be assured that products that claim to be sustainable really are." And she added that the proposed rules will support investment in solutions to some of the world's biggest ESG challenges.
This is consistent with the Behavioral Insights Team study (BI Team 2021) which found that more than half of consumers believed that exaggerated, misleading or inaccurate greenwashing claims were a reliable source of information about a company's environmental practices.
Continuing with Sadan, the proposed regulation on the use of sustainable terms on packaging and products will place the United Kingdom at the forefront of sustainable investment internationally. “We are raising the bar by setting strong regulatory standards to protect consumers in line with our broader FCA strategy,” he said.
Yasmin Raza from the UK Financial Conduct Authority on her view of how to regulate #ESG and prevent greenwashing #OGCLP22 pic.twitter.com/Y5h9R3cS0i
— Open Geospatial: OGC (@opengeospatial) November 15, 2022
FCA proposal for use of sustainable terms on packaging and products
Basically, the restrictions on how certain terms related to sustainability can be used in product names and their marketing that the FCA suggests, contemplate investment product labels and will have three categories:
Sustainable approach—for products that invest in assets that are environmentally or socially sustainable.
Sustainable enhancers—for products that invest in assets to improve environmental or social sustainability over time.
Sustainable impact —for products that invest in solutions to environmental problems or social problems to achieve a positive, measurable impact in the real world.
It thus classifies limitations on how certain Middle East Mobile Number List sustainability-related terms, such as 'ESG', 'green' or 'sustainable', can be used in product and marketing names that do not qualify for sustainable investing labels. He also proposes a more general anti-greenwashing rule that covers all regulated companies. This will help avoid misleading marketing of products.
sustainable terms in packaging and products
Additionally, the agency plans to integrate consumer-oriented disclosures to help consumers understand the key characteristics related to the sustainability of an investment product; This includes disclosure of investments that a consumer does not expect to remain in the product.
As well as more detailed disclosures, suitable for institutional investors or retail investors who want to know more; and requirements for product distributors, such as investment platforms, to ensure that consumer-facing labels and disclosures are accessible and clear to consumers.
Alongside these measures, the FCA is stepping up its supervisory commitment to sustainable finance and enhancing its enforcement strategy. This includes checking how firms have responded to concerns raised in the FCA's letter to authorized fund managers about ESG-related claims in the UK.
The measure is due to the fact that, given the growth in demand for investments based on environmental, social and governance (ESG) criteria, an increase in sustainable terms has been detected in packaging and investment products. The financial regulator notes that exaggerated, misleading or unsubstantiated claims about ESG credentials damage sustainability efforts and fracture trust in these products.
Measures launched to protect consumers from greenwashing
The proposed new regulation will protect consumers and improve confidence in sustainable investment products. The FCA is proposing to introduce sustainable investment labels which it says will give consumers the confidence to choose the brands that are right for them.
Sacha Sadan, Director of Environment, Social and Governance at the FCA, said: “Greenwashing misleads consumers and erodes trust in all ESG products. "Consumers need to be assured that products that claim to be sustainable really are." And she added that the proposed rules will support investment in solutions to some of the world's biggest ESG challenges.
This is consistent with the Behavioral Insights Team study (BI Team 2021) which found that more than half of consumers believed that exaggerated, misleading or inaccurate greenwashing claims were a reliable source of information about a company's environmental practices.
Continuing with Sadan, the proposed regulation on the use of sustainable terms on packaging and products will place the United Kingdom at the forefront of sustainable investment internationally. “We are raising the bar by setting strong regulatory standards to protect consumers in line with our broader FCA strategy,” he said.
Yasmin Raza from the UK Financial Conduct Authority on her view of how to regulate #ESG and prevent greenwashing #OGCLP22 pic.twitter.com/Y5h9R3cS0i
— Open Geospatial: OGC (@opengeospatial) November 15, 2022
FCA proposal for use of sustainable terms on packaging and products
Basically, the restrictions on how certain terms related to sustainability can be used in product names and their marketing that the FCA suggests, contemplate investment product labels and will have three categories:
Sustainable approach—for products that invest in assets that are environmentally or socially sustainable.
Sustainable enhancers—for products that invest in assets to improve environmental or social sustainability over time.
Sustainable impact —for products that invest in solutions to environmental problems or social problems to achieve a positive, measurable impact in the real world.
It thus classifies limitations on how certain Middle East Mobile Number List sustainability-related terms, such as 'ESG', 'green' or 'sustainable', can be used in product and marketing names that do not qualify for sustainable investing labels. He also proposes a more general anti-greenwashing rule that covers all regulated companies. This will help avoid misleading marketing of products.
sustainable terms in packaging and products
Additionally, the agency plans to integrate consumer-oriented disclosures to help consumers understand the key characteristics related to the sustainability of an investment product; This includes disclosure of investments that a consumer does not expect to remain in the product.
As well as more detailed disclosures, suitable for institutional investors or retail investors who want to know more; and requirements for product distributors, such as investment platforms, to ensure that consumer-facing labels and disclosures are accessible and clear to consumers.
Alongside these measures, the FCA is stepping up its supervisory commitment to sustainable finance and enhancing its enforcement strategy. This includes checking how firms have responded to concerns raised in the FCA's letter to authorized fund managers about ESG-related claims in the UK.
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