Many in the financial services industry have fallen foul of greenwashing – the overstating of ESG efforts within marketing. This has resulted in a loss of trust from investors in recent years and a demand in improved classification and transparency within sustainable investing.
Regulators are now working on creating standardisation, greater transparency and parameters around greenwashing, particularly regarding investment advice.
The UK’s regulator, the Financial Conduct Authority, released its Sustainability Disclosure Requirements in November last year. One significant change will be to determine if ESG-related labels, if any, are relevant to investment products.
Investors will benefit from this as they can make more informed investment decisions, cutting through the noise, and will hopefully result in the rebuilding of trust in responsible investing.
With these moves to help rebuild trust in mind, we believe sustainable investing is very much alive and remains an important way to mitigate risk and seize new opportunities when investing.