Temporary Measures for Sustainability Disclosure Requirements
The UK Financial Conduct Authority (FCA) sets out temporary measures for Sustainability Disclosure Requirements (SDR), delaying the effective date of naming and marketing rules for sustainability funds until April 2025.
The assets of sustainable funds, represented by environmental, social, and governance, may reach $34 trillion by 2026. Sustainable disclosure requirements will help investors make investment decisions and maintain the UK’s position as a world leading center for sustainable investment.
Related Post: UK FCA Issues Sustainability Disclosure Requirements for Investment Products
Naming and Marketing Rules for Sustainable Funds
In November 2023, the UK Financial Supervisory Authority released a draft of the Guidance on the Anti-greenwashing Rule and began public consultation. The anti-greenwashing rule was officially released in April 2024, and asset management companies were able to use investment labels in their investment products starting from July 2024. The naming and marketing rules for sustainable funds will come into effect in December 2024.
Through contacts with companies in the industry, the UK Financial Conduct Authority has found that some companies take longer than expected to make changes. Given the importance of sustainable disclosure requirements, the UK FCA plans to provide support to these companies by delaying the effective date of sustainable fund naming and marketing rules until April 2025, while encouraging companies to comply with this regulation in advance.
The naming and marketing rules for sustainable funds stipulate that funds can only use relevant terms when they have material pursuit of ESG and sustainable characteristics in terms of investment objectives and policies, otherwise it may be misleading. For funds that conduct marketing based on sustainable development terminology but do not have labels, the new naming rules require funds to have sustainable characteristics while accurately reflecting these characteristics in their names. For example, sustainable funds need to invest at least 70% of their funds in sustainable financial assets. If the company finds it difficult to comply with these principles, the corresponding sustainable terminology cannot be used.
Reference:
FCA Sets out Temporary Measures for Firms on ‘Naming and Marketing’ Sustainability Rules
