By Huw Jones
LONDON (Reuters) -Britain's financial regulator confirmed on Tuesday that its new bespoke rule to combat greenwashing would come into force from May 31 to stop investment firms inflating the green credentials of their products to retail customers.
The new labelling rule is designed to protect consumers by ensuring sustainable products and services they are sold are accurately described, the Financial Conduct Authority said.
Any reference to environmental, social and governance (ESG) sustainability topics in a product or service must be fair, clear and not misleading, meaning they can be substantiated.
Trillions of dollars globally have flowed into investment products that tout their sustainability attractions, leaving regulators to play catch-up with new disclosure rules and other safeguards now being rolled out.
"It gives us an explicit rule on which to challenge firms if we consider they are making misleading sustainability‑related claims about their products or services and, if appropriate, take further action," the FCA said in a document on the rule.
The watchdog said it was also consulting until mid-June on extending to portfolio management firms, including private equity, the sustainability disclosure requirements (SDR) being applied to asset managers since November.
"As the SDR and labelling regime has been developed primarily for retail investors... the proposals to extend the regime are primarily aimed at wealth management services for individuals and model portfolios for retail investors," the FCA said in its consultation document.
The new rules would start to come into force from December, in phases over two years.
"Confirming the new anti-greenwashing guidance and our proposals to extend the Sustainability Disclosure Requirements and investment labels regime are important milestones that maintain the UK’s place at the forefront of sustainable investment," said Sacha Sadan, the watchdog's ESG director.
"Our good and poor practice anti-greenwashing examples will help firms market their products in the right way."