The UK’s Financial Conduct Authority (FCA) recently introduced new investment labels designed to help Britons identify sustainable assets.
However, critics have suggested that these measures alone can’t stop the risk of greenwashing.
UK investors keen to purchase ethical assets for their portfolio with fears of greenwashing often consult specialists in portfolio management in Chester, London and other major cities for an expert and unbiased assessment.
The financial watchdog’s sustainable investment labelling system is part of a wider initiative from the UK Government, first launched in 2021 with the aim of overhauling rules regarding sustainability. The initiative also includes the yet-to-be-finalised creation of a new green taxonomy for UK-based companies. This will include a set of established thresholds and specific targets to help assess whether financial activities and products meet objectives for sustainability.
Britain isn’t the first nation to attempt this. Across Europe, multiple labelling schemes already exists for investors in Belgium, France, Austria and Luxembourg, as well as in several Nordic countries.
However, some players in the European investment market have seen the labelling process as a potential marketing tool. Companies are rebranding existing investment products employing the word “sustainability” in their description, without infusing the investment strategies involved with evidence-based objectives for sustainability.
For this reason, an initiative designed as a ground-breaking regulatory tool designed to bring the industry both comparability and transparency could end up failing. If the European example applies to the UK, the FCA’s labelling system could end up being viewed by consumers, investment companies, regulators and trade associations as a vehicle that amplifies the risks of possible greenwashing and confusion for potential investors.
