With the FCA’s anti-greenwashing rules coming into force from 31 May, advisers may be thinking this doesn’t affect me, it’s down to the fund managers right?
I’m afraid not. These rules also apply to financial advisers in situations where you promote or advise on any product or service that claims to have sustainability characteristics. This also applies to your own advice service.
So, what do you have to do?
If you communicate with a client in the UK about a financial promotion then you should check that any of this material references sustainability characteristics and review the content. This could include your website, marketing collateral and other financial promotional material as well as suitability reports.
What should advisers look out for:
- Is the reference to sustainability correct and can it be substantiated?
- Is it clear and presented in a way that can be understood by the target audience?
- Is it complete and doesn’t hide any important information?
- Does the information give a balanced view?
- If comparisons are included, are they fair and meaningful?
Advisers need to know the ropes and the FCA Non-Handbook guidance is a helpful starting point which provides some examples of good and bad practice.
What’s next in terms of sustainability?
From 31 July, 24 fund managers can begin to apply the new Sustainability Disclosure Requirements and investment labels. Don’t forget there are four labels now rather than the three initially proposed by the FCA in the initial consultation paper:
- Sustainability Impact
- Sustainability Focus
- Sustainability Improvers
- Sustainability Mixed Goals
TCS Research Hub found that most fund managers focused their initial attention on reviewing their collateral for the 31 May anti-greenwashing deadline. They are also making headway on the decision as to which SDR label to apply to their fund range – or whether they will actually apply a label. Interestingly, a few fund managers we have spoken to won’t be applying a label at all and even if they are applying a label, it won’t be as of 31 July due to the disclosures required from this date. They just won’t be ready in time.
We know that by 2 December the naming and marketing rules come into effect, which is realistically when the fund managers will have to apply the new label should they choose to do so.
Do the same rules apply to Discretionary Investment Managers (DIMs)?
Well, everyone has to comply with the anti-greenwashing rules by the end of May. As it stands DIMs will have until 2 December to get their ducks in a row and ensure appropriate labels are applied and relevant disclosures made to managed portfolio services and bespoke portfolios. However, whether bespoke portfolios should be included is subject to some concern and there are a number of parties feeding back to the FCA on taking such portfolios out of scope or to provide them with more time. Applying the disclosure requirements to each and every individual bespoke portfolio will be quite onerous as well as very expensive. We’ll have to see what the outcome of the consultation is to measure the impact on this specific market.
So, it’s not all plain sailing in the sustainable investing space – but there’s action advisers can take to ensure they run a tight ship.
And of course, please do reach out to the team at TCS if you need any further insight and support on this new regulation.