As sustainable and ethical investing continues to grow, so does the threat of greenwashing. On 31 May 2024, the Financial Conduct Authority (FCA) stepped in, introducing their anti-greenwashing measures.
Keep reading to find out how the FCA is tackling greenwashing.
What is greenwashing?
Greenwashing is where companies present themselves as environmentally responsible or sustainable through misleading or false claims. Greenwashing threatens consumer trust and undermines the integrity of the sustainable investing market. Regulation from the FCA is crucial for several reasons:
- to protect consumers;
- to maintain market integrity; and
- to make an environmental impact.
The FCA’s measures to tackle greenwashing
On 31 May 2024, the FCA introduced their long-awaited guidelines and reporting standards. This signalled a clear commitment to protect consumers and promote transparency. The finalised guidance states that sustainability references should be:
- Correct and capable of substantiation - factually accurate and supported by robust, relevant and credible evidence that is regularly reviewed.
- Clear - transparent and straightforward, with the meaning of all terms generally understood by the intended audience.
- Comparable - fair and meaningful whether in relation to a previous version of the same product or service or to a competitor’s product or service.
- Complete - considering the full lifecycle of the product or service and not omitting or hiding important information that might influence decision-making. This extends to not highlighting only positive sustainability impacts where this disguises negative impacts.
These changes are vital in creating a more environmentally responsible economy. Companies and consumers both stand to benefit from a more trustworthy and transparent marketplace.
What are the new SDR labels?
The FCA’s new sustainability labels aren’t for all financial products. For example, they won’t be used on pensions for now. However, you might start seeing these on certain investment funds from 31 July 2024. Here’s a breakdown of what they are and what they include.
Label: Sustainability focus
For: Products that are environmentally or socially sustainable, determined by a robust, evidence-based standard of sustainability.
Label: Sustainability improvers
For: Products that have the potential to become more sustainable over time, determined by their potential to meet a robust, evidence-based standard of sustainability over time.
Label: Sustainability impact
For: Products that seek to achieve a predefined, positive, measurable environmental and/or social impact.
Label: Sustainability mixed goal
For: Products that meet or have the potential to meet a robust, evidence-based standard for sustainability, and/ or invest with an aim to achieve positive impact.
The impact of the FCA’s actions
Concerns over climate change have fuelled demand for impact investing among pension savers. Our research found that some future retirees could be at risk of homelessness due to climate change. Retirees may need an extra £25,000 in retirement savings to pay for climate-related food costs.
The PensionBee Impact Plan
In February 2023, we launched our Impact Plan. There are many international companies tackling global issues, while generating long-term investment returns. The Impact Plan only invests in these companies, helping you save for retirement.
Our Impact Plan was driven by customer feedback and created in partnership with BlackRock. Customers invested in our Fossil Fuel Free plan expressed a strong interest in a plan that goes further. The Impact Plan only invests in companies, such as RELX, that support underserved communities and tackle unaddressed challenges. This helps improve lives and creates a better planet for us all. The impact of these companies on people and the planet can be measured, so you know they’re contributing to real change.
Increasingly, customers want to balance positive returns with prioritising environmental and social issues. We’ve seen first-hand how younger savers are more likely to be invested in one of our socially responsible plans.
Where to learn more about socially responsible investing (SRI)
You can visit our Plans page to learn how you can invest in line with your values and discover our available SRI plans including our Shariah-compliant plan and our Impact Plan.
Discover more about SRI and impact investing with PensionBee via our helpful blogs, videos and podcast. You can learn about impact investing in episode 16 of The Pension Confident Podcast. Our expert guests, including David Hayman from Make My Money Matter, discussed how it can be used to drive change whilst saving for your retirement. You can read the full transcript or watch the highlights on YouTube.
We’d love to hear from you. You can always send comments and questions to our team via engagement@pensionbee.com.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
