Some funds can’t justify green credentials, UK watchdog says
LONDON, July 19 (Reuters) – Many asset managers seeking clearance for sustainable funds are failing to provide precise information to back up their green credentials, the UK financial watchdog said on Monday.
Investors are investing more in funds that have a stated strategy to focus on environmental, social and governance (ESG) themes and help tackle climate change and other sustainable goals.
The silver wall in ESG funds has already raised concerns among regulators about “greenwashing” or overestimated green credentials.
The Financial Conduct Authority has stated that ESG and sustainable funds are now the fastest growing segment of the European fund market, resulting in a high volume of authorization requests.
“A number of them were poorly drafted and fell below our expectations. They often contain claims that do not stand up to scrutiny,” the FCA said in a letter to fund managers, setting out guiding principles on what it expects from applications for authorization.
The questions raised by the regulator at the authorization stage should have already been addressed earlier.
“We expect to see hardware improvements in future applications,” FCA said.
“We also expect continuous, clear and accurate information to consumers when funds make ESG-related claims, and we want the funds to meet their stated goals and / or strategy. “
The European Union has already set principles for ESG investing, known as the Sustainable Finance Disclosure Regulation or SFDR, but Britain is no longer in the bloc.
Since many asset management companies are cross-border, the FCA has said its guiding principles are intended to complement the SFDR until Britain expands its own regulations in this area.
Reporting by Huw Jones Editing by David Goodman and Susan Fenton
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