UK Watchdog Cautions Investment Funds On Use of ‘ESG’ Labels

The UK’s financial watchdog, the Financial Conduct Authority (FCA), has warned investment funds not to overuse the “ESG” (Environmental, Social, and Governance) branding. Regulators throughout the world are cracking down on corporations and funds that make misleading claims about their environmental friendliness in order to lure investors.

Many funds are now claiming to be ESG- or sustainability-focused. However, according to Mhairi Jackson of the Financial Conduct Authority (FCA), some of them do not actually adhere to ESG principles. The FCA is taking a stand against this type of fraud.

There are also cases where funds claim to be sustainable but invest in companies that have a large carbon footprint, which doesn’t match their supposed goals. The FCA is working on new rules to make sure investment funds are clearer about their sustainability practices and to set standards for using the ESG label.