The FCA’s proposal – new rules to combat greenwashing and enhance sustainability disclosure for portfolio managers

The Financial Conduct Authority (FCA), the regulatory body overseeing financial services and markets in the UK, has proposed new rules aimed at preventing greenwashing and enhancing sustainability disclosure for portfolio managers. This proposal extends the Sustainability Disclosure Requirements (SDR), introduced for asset managers in November 2023, to include portfolio managers. The SDR aims to assist investors in evaluating the sustainability features of investment products and mitigate the risk of greenwashing. The initial SDR for asset managers included regulations on avoiding greenwashing in sustainability-related product claims, naming and marketing funds based on sustainability characteristics, and implementing a sustainable investment product-labelling system. While initially designed for retail investors, the proposed extension now covers firms managing investments for consumers, particularly focusing on wealth-management services for individuals and model portfolios for retail investors.

However, firms serving professional clients in portfolio management are exempt from certain naming and marketing requirements. Key aspects of the initial SDR included rules ensuring transparency and accuracy in sustainability-related claims and introducing a labelling regime with four distinct labels. Under the proposed extension, portfolio managers would adhere to new naming and marketing rules by December 2024 and could use the labels concurrently with asset managers. Larger firms would need to provide product-level disclosures under the SDR from December 2025. In addition to the proposal, the FCA has issued updated guidance to assist firms in complying with the new regulations. The guidance addresses stakeholder feedback and provides clarification on rule scope, examples of best practices and the effective date for the anti-greenwashing rule.

Source: FCA Proposes Anti-Greenwashing and Sustainability Disclosure Rules for Portfolio Managers – ESG Today

About the Authors

Associate Director, Investment Banking

Prachurjya has over 16 years of experience in investment banking with Acuity Knowledge Partners. At Acuity, he has led sector and product-specialist pilot teams across Capital Markets, ESG, Debt Advisory, Loan Syndications, Metals & Mining and Real Estate. He has been actively involved in setting up and on-boarding new ESG Advisory, ESG DCM and Sustainable Finance teams for various bulge bracket investment banks. Within DCM and Rating Advisory, he has been instrumental in helping the clients achieve over 30% in annual savings on both regular and adhoc tasks through standardization of the outputs and deployment of our proprietary BEAT tools.

Delivery Manager, Investment Banking

Puja has 6 years of extensive experience in ESG, Climate Change & Sustainability and she is supervising the ESG team at Acuity. She also has diverse experience in conducting ESIA, EHS compliance audits, ESG Risks and Controls, EHS & ESG Due Diligence assessments. Prior to joining Acuity, she was working with companies like KPMG Global Services, EY India and ERM India. She has expertise in provisioning extensive research requirements for clients through preparation of Peer Benchmarking, Target Compilation, Sustainability report, Sustainable Finance Updates and Sectoral ESG Thematic Detailing Engagement.

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