Consumers are continuing to seek out sustainable investment opportunities and they need to be able to trust sustainable investment products and the market for those products.

Research carried out by the Financial Conduct Authority ("FCA") found that 8 out 10 people wanted their investments to do some good as well as providing a financial return. Due to this demand for sustainable investment opportunities, there are now around 1000 sustainable or ethical funds available to investors. Given the level of demand and the number of funds competing for consumers' money greenwashing is an increasing issue. Sustainability-related claims need to stand up to closer scrutiny. The concern is that if sustainability claims made by investment firms are not regulated consumers will lose trust in the market and be misled as to what they have invested in.

The FCA is seeking to address these issues through its proposals for new rules to combat greenwashing in its recent Consultation Paper, which follows on from the FCA's November 2021 Discussion Paper on the topic. The proposals will primarily impact asset managers but some of the proposals extend to all regulated firms.

Proposed Reforms

The FCA have proposed the following reforms:


Sustainable investment labels will be introduced to help improve consumer understanding of the investment products they choose. Three sustainable investment labels will be introduced: "sustainable focus", "sustainable improvers" and "sustainable impact", each of which will deliver a different profile of assets and consumer preferences. It is up to firms to decide whether or not to use a label. If they choose not to, they must ensure they follow the naming and marketing rules set out below. Where firms do use the labels, they must meet the FCA's proposed qualifying criteria.


  • Consumer facing disclosures will be introduced which will set out the key sustainable features of the investment product in an accessible way. This will include the sustainability objective, investment approach and performance against that objective.
  • Three categories of more detailed disclosures, targeted at a wider range of stakeholders including institutional investors, are also proposed:

1. Pre-Contractual disclosures

These disclosures (eg in a fund prospectus), like the consumer facing disclosures above, set out the sustainability features of the investment product in more detail.

2. Ongoing sustainability information

These disclosures, which include key sustainability-related performance indicators and metrics, are required if a product qua4lifies for a sustainable investment label. The disclosures must be made in a "sustainability product report".

3. Entity-level disclosures

These disclosures will be made in a "sustainability entity report" and will set out how a firm is managing sustainability risks and opportunities. These disclosures must be made by all in scope firms even if they do not use a label.

Anti-Greenwashing rule

A general anti-greenwashing rule is set to be introduced to reiterate the requirement that any sustainability-related claims are "clear, fair and not misleading". This rule will apply to all regulated firms and will apply from the release of the FCA's Policy Statement.

Naming and Marketing rule

A ban on using sustainability-related terms, including 'ESG', 'sustainable', 'green' and 'net zero,' in describing an investment product which does not use one of the labels has also been proposed.

Distributor Requirements

Distributors of in-scope investment products will be required to ensure that any labels and consumer disclosures are easily available and visible to consumers.

Next Steps

The FCA are proposing to introduce the reforms on a staggered basis as set out below:


Proposed Timeline

General anti-greenwashing rule.

Effective from 30 June 2023 (the intended release date of the FCA's Policy Statement).

Labelling, naming and marketing, consumer/pre contractual disclosures and distributor rules.

Effective from 12 months after the publication of the Policy Statement. Provisionally 30 June 2024.

Ongoing sustainability performance related disclosures.

Effective from 24 months after the publication of the Policy Statement. Provisionally 30 June 2025.

Entity level disclosures in the suitability entity report.

The timeline depends on the size of firm, but the largest will start making these disclosures 24 months after the Policy Statement. Provisionally 30 June 2025.

The consultation is open until 25 January 2023 with the final rules to be published by 30 June 2023. While the Consultation Paper has most impact on asset managers, the anti-greenwashing rule will apply to all regulated firms so all UK-authorised firms should be considering the detail of the proposals and their potential effect on firms' business activities.


Lindsay Lee

Senior Associate

Ian Harvey

Trainee Solicitor