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25 October: Ethical Investments Urged To Drop ‘Lazy Labels’
The Financial Conduct Authority (FCA), the UK’s financial regulator, has proposed rules to prevent consumers from being misled by exaggerated claims from supposedly environmentally friendly investments, writes Andrew Michael.
Environmental, or ethical, investing covers a range of issues, from concerns about corporate behaviour to anxiety about climate change.
Within this sphere, the growth enjoyed in recent years by environmental, social and governance (ESG) investing means it has become a mainstay of the global financial landscape, with hundreds of billions of pounds invested worldwide in funds that purport to do good.
But according to the FCA, “exaggerated, misleading or unsubstantiated claims about ESG credentials damage confidence in these products.”
In a bid to clamp down on greenwashing – where unsubstantiated claims are made to trick consumers into thinking a company’s products are more environmentally sound than they really are – the FCA is proposing a package of measures and restrictions.
These include investment product-sustainability labels and restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ are used.
Sacha Sadan, FCA ESG director, said: “Consumers must be confident when products claim to be more sustainable than…
