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According to the FCA, the new rules come as investors increasingly seek investments with positive environmental and social impact, with global AUM in ESG-oriented funds anticipated to grow to $36 trillion by 2026, while around 70% of investors report lacking trust in the sustainability claims of investment products.
Firms with assets under management greater than £50 billion would be required to begin providing product-level disclosures under the SDR from December 2025, and those with AUM greater than £5 billion from December 2026. Our good and poor practice anti-greenwashing examples will help firms market their products in the right way.”
The annual Sustainability Report produced by enterprise software firm SAP appears to reveal that 8 in 10 (83%) UK leaders will maintain or increase their investment in sustainability action by 2026.
But as these moves come under greater scrutiny and regulators and investors take action against greenwashing, could we see a knock-on effect of green hushing and bleaching cause a shrinking universe of options for ESG investors? Sustainable growth? It is not hard to see why offering sustainableinvestments is so appealing to companies.
Difficulties in definition continue to thwart efforts to demonstrate the financial benefits of sustainableinvestments. Sustainable fund flows attracted US$37 billion of net new money in Q4 2022, with global sustainable fund assets reaching a total of US$2.5 trillion by 2026, up from US$18.4 trillion in 2021.
Drastic changes to the scope of sustainability reporting rules will limit investor access to comparable and reliable sustainability data, said Aleksandra Palinska, executive director at the European SustainableInvestment Forum, Europes umbrella network for sustainable finance, in a press release.
European regulators have ratcheted up efforts to eliminate greenwashing from the investment sector. End of an era I – The fight against greenwashing inched ahead with the release of final guidelines for naming ESG- or sustainability-related funds by the European Securities and Markets Authority (ESMA).
Industry experts suggest UK requirements would need to be finalised and in effect from mid-2026. The draft legislation proposed by HM Treasury is a response to investor concerns over the quality, transparency and comparability of the ESG ratings they use to inform investment decisions. “It
FCA confirms sustainability disclosure and labeling regime The Financial Conduct Authority (FCA) has issued a policy statement setting out its final rules and guidance on Sustainability Disclosure Requirements (SDR) and investment labels. Next steps: The anti-greenwashing rule will come into effect from May 31, 2024.
In addition, while SFDR was designed to enhance transparency around sustainability, Article 8 and 9 disclosure requirements have been used “in marketing material as ‘quality labels’ for sustainability, consequently posing greenwashing and mis-selling risks”.
Moving forward, companies will have to report on their alignment to the new activities starting in 2025, while FMPs will need to disclose in 2026. Considering that aviation is one of the largest contributors to carbon emissions, developing a common lexicon to describe and encourage sustainableinvestments is critical.
Following on, James d’Ath , the TNFD’s Head of Nature Data, warned that regulators were already beginning to “move away from self-regulation to more government-led requirements, due to concerns over greenwashing”.
SustainableInvestment Forum, in a statement. When fully in place in 2026, the rule will require large, publicly listed companies to disclose their Scope 1 and Scope 2 greenhouse gas emissions from their direct operations and energy use if the emissions are sizeable enough to represent a material financial risk to the company.
. “Growth is the number one mission of this government With the global ESG market predicted to surpass US$40 trillion by 2030, investors and markets are making increasing use of ESG ratings to inform investment decisions and capital allocation. ” A question of terminology The draft legislation itself contains few surprises.
That said, its not clear whether such a law could pass in the next two years, when the 2026 mid-term elections are expected to turn against the Republicans. And expect the Trump administration to reverse a Biden Department of Labor rule expressly permitting pension trustees to consider ESG issues in investment decisions.
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