FCA issued policy statement (PS) 23/16 which confirms package of measures to improve transparency of sustainable investment products and minimize greenwashing.
New rules put in place sustainability disclosure requirements, investment label regime.
FCA also published the results of consumer research on its revised proposals.
Also follows UK FCA Nov. 2023 review of fund managers' ESG practices, see #191697.
Package
Anti-greenwashing rule for all FCA-authorized firms to reinforce that sustainability-related claims must be fair clear, not misleading, FCA consulting on guidance on rule.
4 labels to help consumers to navigate investment product landscape, enhance trust.
These are: Sustainability Impact, Sustainability Focus, Sustainability Improvers, and Sustainability Mixed Goals, the latter was added following feedback from stakeholders.
Naming and marketing rules for investment products, to ensure use of sustainability-related terms is accurate; consumer-facing information to help understand products.
Detailed information in pre-contractual, ongoing product-level, and entity-level disclosures, targeted at institutional investors/consumers seeking more information.
Requirements for distributors to ensure that product-level information (including the labels) is made available to consumers, to help them make investment decisions.
Rules do not apply to portfolio management products/services, FCA will consult on this.
Changes to Consultation Proposals
Policy statement contains table outlining main areas of feedback received and how FCA has responded to it, notes changes to proposals made due to stakeholder comments.
These include: amendment re use of sustainability-related terms which was thought too restrictive, rules now allow for use of most sustainability terms if conditions met.
A fourth label, Sustainability Mixed Goals, introduced for funds that invest across different sustainability objectives and strategies aligned with the other categories.
Clarification of stewardship expectations; clarification re internal frameworks being used for credible standard that product's assets must meet, independent assessment.
Clarification around investing in public markets; changed label names from sustainable to sustainability to avoid impression that fund assets are already sustainable.
FCA set out new timeline for implementation, taking account of the impact of changes.
Rules
Sustainability Labeling and Disclosure of Sustainability-Related Financial Information Instrument 2023 (FCA 2023/9) amends FCA HB to implement the new requirements.
The anti-greenwashing rule and guidance comes into force on May 31, 2024, firms can begin to use the four labels with accompanying disclosures from Jul. 31, 2024.
Naming and marketing rules in force, with accompanying disclosures, on Dec. 2, 2024.
Ongoing product-level and entity-level disclosures for firms with assets under management (AUM) of greater than £50bn come into force on Dec. 2, 2025, entity-level disclosure rules extended to firms with AUM greater than £5bn on Dec. 2, 2026.
Dec. 2023 Handbook Notice 114
On Dec. 15, 2023, UK FCA issued Handbook Notice 114 confirming above changes.
In Jan. 2024, UK FCA established working group for financial advisers, see #198050.
Feb. 2024 Sustainability Disclosure Guidance Page
On Feb. 2, 2024, UK FCA added new webpage, Sustainability disclosure and labelling regime, setting out details of the regulator's package of measures, to assist firms.
Page details which firms the new rules and guidance apply to, points firms to policy statement 23/16 which contains the rules, highlights annex 2 which gives an overview.
Sets out what different types of firms should be doing in preparation for the new rules, noting actions for all authorized firms, for UK asset managers, and for all distributors.
FCA will add to page in future to provide clarification on common queries from firms.
An infographic illustrates the dates on which the rules and guidance come into force.
Information is also given on the 4 investment labels for products with sustainability objectives, including process to use a label and how the label should be displayed.
Page also includes information on naming and marketing requirements and exceptions.
Mar. 2024 Climate Change and Sustainable Finance Page
On Mar. 22, 2024, UK FCA updated Climate change and sustainable finance webpage.
Updated page to reflect Nov. 2023 publication of final rules for sustainability disclosure requirements and investment labels, consultation on anti-greenwash rules guidance.
Includes high-level view of rules including anti-greenwashing rule, labels to help consumers navigate products, naming and marketing rules, along with disclosures.
Also includes link to outcome of Guiding Principles review, found more work needed.
FCA expects authorized fund managers (AFMs) to assess how they are meeting rules and guidance re ESG and sustainable investment funds in preparation for new regime.
Also added section to page on the new Advisers' Sustainability Group, link to webpage.
FCA also amended section on Vote Reporting Group, which is considering next steps on proposals for voluntary, comprehensive, and standardized vote reporting template.
May 31, 2024 Sustainability Disclosure Guidance Page Update
On May 31, 2024, UK FCA updated its guidance page on the sustainability disclosure and labelling regime, to reflect recent events, add further information for firms.
Updated to flag proposals to extend regime to portfolio management, see #209553.
Also updated to reflect that FCA guidance to anti-greenwashing rule now in force.
A new section called Criteria is added to the page, giving answers to some of the common questions the regulator has received, these cover various relevant topics.
On Jul. 1, 2024, UK FCA updated its Sustainability disclosure and labelling regime guidance page to add information on notifying FCA about use of an investment label.
Aug. 2024 Downloadable Labels Available
On Aug. 19, 2024, UK FCA updated Sustainability disclosure and labelling regime page.
Added downloadable versions of the four investment labels for products with sustainability objectives, for distributors subject to ESG 4.1.16 to ESG 4.1.19.
Labels are: Sustainability Mixed Goals; Sustainability Improvers; Sustainability Impact; Sustainability Focus; each available as black text on white background and vice versa.
FCA asserts its exclusive rights to the trademarked investment label logos under UK law, prohibiting unauthorized use, reproduction, modification without prior consent.
By downloading the investment labels, firms agree to these trademark terms of use.
The labels can be displayed from Jul. 31, 2024, must be used from Dec. 2, 2024.
Firms must notify FCA when using an investment label through form on Connect.
FCA does not approve labels, but firms re required to notify regulator when they use, revise or stop using a label, steps for notifying FCA are set out on the guidance page.
In Sep. 2024, UK FCA set out temporary measures on marketing rules, see #225338.
Nov. 1, 2024 Pre-Contractual Disclosure Examples
On Nov. 1, 2024, UK FCA issued The Sustainability Disclosure Requirements (SDR) and investment labels: pre-contractual disclosure examples to assist firms with labels.
The SDR and investment labels regime will enter into force on Dec. 2, 2024, though firms have been able to use the investment labels since Jul. 31, 2024.
Key concept of new regime is that to qualify for a label, specific criteria must be met and supported by disclosures, FCA now provides illustrative examples and approaches across a selection of labels to showcase how applicants can meet the requirements.
Much of practice will be relevant across all investment labels, examples are based on FCA's experience of applications to date, are non-exhaustive, aim to assist applicants.
