Britain to improve 'green' labelling of investment products

By Huw Jones

LONDON (Reuters) -Britain's markets watchdog put forward ideas on Wednesday to improve labelling of investment products that tout climate-friendly credentials.

The flow of cash into products that claim to meet environment, social and governance (ESG) considerations favoured by ethical investors has rocketed over the past year, raising concerns among regulators over greenwashing or exaggerated green credentials.

The Financial Conduct Authority (FCA) said that without common labelling standards there was a risk consumers become confused by the array of choices and unable to assess the suitability of a product.

Investors currently face interchangeable uses of key sustainable finance and ethical terms, and the lack of agreed definitions, the watchdog said.

"Certain investment products will be required to display a label reflecting their sustainability characteristics," the FCA said in a discussion paper to coincide with the UN Climate Summit in Glasgow.

Firm proposals will be published for public consultation in the second quarter of next year.

The paper sets out criteria that could be used by asset managers and investment firms for labelling products, based on a product label and two layers of disclosures.

The first layer would provide standardised product classification for retail investors, with the second layer giving more detailed information for institutional investors.

The FCA said its approach would dovetail with European Union disclosure rules, given that many firms have to comply with standards in the bloc and Britain.

The UK watchdog proposed in June that a wider range of companies should adopt globally accepted standards for disclosing the impact of climate change on their business.

Currently only companies on the London Stock Exchange's premium listing use the standards to make climate disclosures.

FCA CEO Nikhil Rathi is due to tell the UN conference on Wednesday that asset managers and companies with a standard listing will be included from the end of this year.

A new body was unveiled on Wednesday at the UN climate summit to write global company climate disclosure standards that Britain is expected to apply.

(Reporting by Huw JonesEditing by Mark Potter and Giles Elgood)