The UK’s Financial Conduct Authority (FCA) has provided an update on its regulatory initiatives, once again pushing back certainty around sustainability labelling.
- The FCA has once against delayed publication of the rules around sustainable investment in the UK.
- FCA survey research shows 80% of respondents wanted their money to ‘do some good’, while also providing a financial return; 71% wanted to ‘invest in a way that is protecting the environment’ and 71% would not put their money into ‘investments which are unethical’.
- Delays in clarification on what it means to invest in sustainable finance only leaves the market more open to greenwash and delays concrete action on investment flows.
In a regulatory initiatives grid update from co-chairs Nikhil Rathi, CEO of the FCA, and Sam Woods, deputy governor, prudential regulation at the Bank of England, the regulator said: “The Treasury has published the updated Green Finance
Strategy 2023 in March, with the aim of ensuring the UK market is well positioned to support the transition to net zero.
“Following the FCA’s Sustainability Disclosure Requirements and investment labels consultation and the range of comments, we have decided to publish the Policy Statement in Q4 2023, having been previously planned for Q3 2023.”
In October 2022, the FCA published CP 22/20 on the SDR, setting out the FCA’s proposals for a regime which should increase transparency about the sustainability profile of both products and firms – and reduce the risk of harm arising from greenwashing.
Delays on guidance on labelling is a concern for the financial sector
This further delay to the publication of Sustainability Disclosure Requirements and investment labels is a great concern to the market, as these regulations are crucial to increase transparency on the sustainability profile of products and firms and reduce the risk of harm arising from greenwashing.
James Alexander, Chief Executive of UKSIF said: “It is deeply disappointing to see yet another delay to the publication of the finalised SDR and fund labelling regulations. We see these as crucial in the development of the UK’s sustainable finance leadership and building trust for consumers, and essential to give certainly to the industry on future regulatory requirements.
“This delay is symptomatic of the slow pace of implementation of other policies announced in the Green Finance Strategy in March this year, including corporate disclosure requirements and the Green Taxonomy, which must all be progressed as a matter of urgency. If the government is serious about making the City, and the UK as a whole, a global leader in green finance, it needs to deliver, not delay.”
The long-awaited sustainable finance rules are coming out of the public consultation that closed in January 2023. They are expected to contain labels that help consumers navigate the complexities of the sustainable investment market.
Th rules are expected to contain the three fund labels set out in the FCA’s consultation that were published in October 20200 (see p.30):
- sustainable focus funds that invest in sustainable assets,
- sustainable improver funds that invest in assets looking to improve their sustainability over time, and
- sustainable impact funds that invest in solutions.
This is the second time that release of the guidance on sustainability labels has been pushed back. When the release of rules was pushed back for the first time it was apparently to ensure that there was sufficient time to integrate all the feedback received, and to ensure that whatever plans were released would address any practical challenges. Right now it feels as if the FCE is just avoiding the issue.