FCA updates on Sustainability Disclosure Requirements (SDR) and investment labels consultation
The UK's Financial Conduct Authority (FCA) has published an update on its consultation on Sustainability Disclosure Requirements (SDR) and investment labels. The FCA received around 240 responses to the consultation, which closed on 25 January 2023.
The FCA is proposing to introduce a package of measures aimed at clamping down on greenwashing. This includes sustainable investment labels, disclosure requirements and restrictions on the use of sustainability-related terms in product naming and marketing.
The FCA has said that it is grateful for the feedback it has received on its proposals. It has also said that it will take into account the feedback when it publishes its final rules and guidance in a policy statement by the end of the first half of 2023.
Sustainability Disclosure Requirements (SDR)
The SDR will require asset managers and insurance companies to disclose information about the sustainability risks and impacts of their investments. This information will be made available to investors so that they can make informed decisions about their investments.
The SDR will cover a wide range of assets, including equities, bonds, and real estate. It will also cover a wide range of sustainability risks and impacts, such as climate change, biodiversity loss, and water scarcity.
The SDR is a significant step forward in the fight against greenwashing. It will require asset managers and insurance companies to be more transparent about their sustainability credentials. This will help investors to make informed decisions about their investments and to support the transition to a more sustainable economy.
Investment labels
The FCA is also proposing to introduce a new regime for investment labels. This regime will allow asset managers and insurance companies to label their products as sustainable if they meet certain criteria.
The criteria for sustainable investment labels will be set by the FCA. They will be based on the International Sustainability Standards Board's (ISSB) Sustainability Accounting Standards (SAS).
The ISSB is an international body that is developing global sustainability accounting standards. The SAS are a set of high-level principles that will provide guidance on how to measure and report on sustainability information.
The FCA's investment labels regime will be a valuable tool for investors. It will make it easier for investors to identify sustainable investment products. This will help investors to support the transition to a more sustainable economy.
Restrictions on the use of sustainability-related terms
The FCA is also proposing to restrict the use of sustainability-related terms in product naming and marketing. This is to prevent firms from making misleading claims about their products.
The FCA will publish a list of sustainability-related terms that will be restricted. Firms will not be able to use these terms in their product names or marketing materials unless they can demonstrate that their products meet the FCA's criteria.
The FCA's restrictions on the use of sustainability-related terms will help to protect investors from greenwashing. It will make it easier for investors to identify products that are genuinely sustainable.
The FCA's proposals are a significant step forward in the fight against greenwashing. They will help to improve transparency and accountability in the financial sector. This will help to protect investors and to support the transition to a more sustainable economy.
https://www.fca.org.uk/news/news-stories/fca-updates-sustainability-disclosure-requirements-and-investment-labels-consultation
