The Investment Association (IA) and UKSIF have both raised concerns over the timeline for the implementation of the UK’s greenwashing rule as asset managers rush to meet the May deadline.
The Financial Conduct Authority consulted on guidance for its anti-greenwashing rule, which sets out four tests for sustainability references, when it released a wider package of regulation late last year.
The guidance gives more detail on the interpretation of each of the tests, as well as examples of sustainability claims that may break the rule.
The guidance and rule are both set to come into force at the end of May, the first of the deadlines this year. Managers will be able to use sustainability labels for their retail funds at the end of July, while rules for disclosures and fund naming and marketing come into force in early December.
UKSIF, which sat on the FCA’s disclosures and labels advisory group, said in its response to the consultation that, while the application was “largely the right approach”, there were concerns among its members that they would not have time to implement the guidance before it comes into effect.
While it had originally anticipated that members would be able to meet the requirements in time, UKSIF said the level of detail was unexpected and may require the establishment of new compliance processes.
One option suggested by UKSIF was for the rule itself to come in to force at the end of May but for the guidance to be delayed until December. This would allow firms to comply in principle from the earlier date, but give them more time to ensure compliance with the details.
These concerns were echoed by the IA, which strongly supported moving the deadline for both the rule and guidance to December. There is at present uncertainty over how manager disclosure will be treated between the May and December dates, and retail investors could be confused by the variation in disclosures as well, it said in its consultation response.
Not every investor group took this approach. INREV, an industry association for investors in unlisted real estate vehicles, endorsed the May date. However, it did urge an “expedited” release of the finalised guidance to give managers time to comply.
All three industry groups said there was a need for more illustrative examples of the rule in action. The current guidance gives seven hypothetical scenarios across a series of products including funds, green bonds and savings accounts, but the groups called for more.
The IA said it would be useful to have examples of good practice alongside those of bad, to allow firms to see what the FCA expects, while INREV said it would welcome more examples that apply to real estate investments.
UKSIF recommended additional illustrative examples of funds and products across a range of strategies and asset classes, and what disclosures may be useful for them. It suggested these could also include examples that may be viewed as deliberately misleading or inaccurate.
The group also called for strengthened guidance on reporting of stewardship outcomes and a set of FAQs on the rules as part of ongoing guidance.