Adopting certain anti-greenwashing rules in the U.K. is proving harder than expected, and in response, the U.K.’s Financial Conduct Authority (FCA) is giving industry firms more time to comply with new requirements for naming sustainable investment funds.
The FCA has given firms an extra four months to meet the “naming and marketing” requirements and disclosure rules, which are scheduled to come into force on Dec. 2; firms will now have until April 2, 2025, to comply with those rules.
Among other things, the new naming rules require that funds marketed based on sustainability-related terms have names that accurately reflect their sustainability characteristics, and that these ESG exposures are material. For example, at least 70% of a sustainable fund’s assets should have sustainability characteristics.
The new requirements are designed to bolster investor protection and help investors make informed investment decisions, with enhanced labelling and disclosure rules for ESG-oriented investment funds.
“In recent weeks, we have been encouraged to see good progress made by firms to comply with the rules, and a strong pipeline of fund applications from firms wishing to use the labels,” the regulator said.
It also acknowledged that it’s taking longer than expected for some firms to make the required changes.
“In particular, some firms wishing to use an investment label, or which need to change the names of their products, require more time to meet the higher standards and prepare the disclosures needed for our approval,” the FCA said in a release.
As a result, the FCA is giving firms added time to meet the new rules for products that use the terms “sustainable,” “sustainability” or “impact,” provided the firms seek regulatory approval for their new names by Oct. 1.
“Where firms can comply with the rules without requiring this flexibility, they should do so. We also expect firms to comply with the rules as soon as they can, without waiting until April 2025,” the FCA said.
In the meantime, firms are expected to continue to comply with other anti-greenwashing rules, the FCA noted.