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The Financial Conduct Authority (FCA), the conduct regulator for financial services firms and financial markets in the UK, announced today that it was pushing out requirements for asset managers to comply with some of the new “naming and marketing rules” for sustainability-related investment products to April 2025, to give more time for firms to meet the new standards.
The new rules form part of the FCA’s Sustainability Disclosure Requirements (SDR), introduced by the regulator in November 2023, aimed at helping investors assess the sustainability attributes of investment products, and to avoid greenwashing risk, to portfolio managers. The SDR included naming and marketing rules for investment products, requiring that sustainability-related terms can only be used in product names and marketing if a label is used, or if a label is not used, the product’s name accurately reflects the products characteristics, but without using terms such as ‘sustainable’, ‘sustainability’, or ‘impact.’
The FCA rules introduce four labels intended to help consumers to differentiate between the sustainability objectives and investment approaches of investment products. These include Sustainability Focus, for products that aim to invest in assets that are environmentally and socially sustainable; Sustainability Improvers, investing in assets that have the potential to improve environmental and/or social sustainability over time; Sustainability Impact, investing with an aim to achieve a predefined positive and measurable environmental or social impact, and; Sustainability Mixed Goals, a newly introduced category for funds that invest across different sustainability objectives and strategies aligned with the other categories. The rules include a series of criteria for products to use the labels, including a requirement for at least 70% of the products assets to ordinarily be invested in line with the label’s objective, as well as pre-contractual and ongoing product-level disclosures for products using a label.
While the new naming and marketing rules were scheduled to come into effect in early December 2024, the FCA has pushed out the implementation to April 2, 2025, noting that “it has become clear it has taken longer than expected for some firms to make the required changes.”
The FCA said that the delayed implementation applied to firms using the terms ‘sustainable’, ‘sustainability’ or ‘impact,’ or a variation of those terms, in the name of a fund, but does not apply to funds using other sustainability-related terms.
The SDR also included an anti-greenwashing rule, applying to all communication by FCA-authorized firms about the environmental or social characteristics of financial products or services, aimed at ensuring that the claims made “are fair, clear, and not misleading, and consistent with the sustainability profile of the product or service.”
The anti-greenwashing rule took effect in May 2024, and is not impacted by the announcement. The FCA added that it expects firms to comply with the naming and marketing rules as soon as they can, instead of waiting until the new deadline.