The consultation period for the FCA’s Consultation Paper CP22/20 Sustainability Disclosure Requirements (SDR) and investment labels has now closed. The paper proposes new rules to help protect consumers from misleading or unsubstantiated sustainability-related claims about products, otherwise known as “greenwashing”.

The key takeaways for funders are detailed in our article FCA’s rules in relation to sustainability disclosure requirements and investment labels: key takeaways for funders, but how could these new proposed requirements help pension trustees fulfil their ESG obligations?

Proposed requirements 

The introduction of sustainable investment labels, to ensure a consistent classification and labelling system for productsSIP). As part of this discussion, trustees should consider whether they are comfortable with the ESG profile of the assets in which they are invested and assess the risks and opportunities associated with climate change. Having clearer investment labels should help trustees assess these matters and give them more information to discuss and challenge their investment advisers and assets managers as to whether the investment products they recommend align with the trustees’ investment strategy as documented in the SIP.

.  Trustees must discuss and agree the relevant and appropriate ESG factors to reflect in their scheme’s investment strategy, focussing on the financial materiality of those factors, and then define that strategy in their Statement of Investment Principles (

Requiring more detailed and frequent disclosures in respect of the sustainability-related features of an investment product, both before entering into an investment product and how it continues to perform throughout the duration of the investment

. In their annual implementation statement, trustees must detail how and the extent to which the SIP has been followed during the year, including in relation to voting and engagement. Greater disclosures from asset managers on the ongoing sustainability-related performance of products should make it easier for trustees to assess this and allow them to better monitor the performance of those funds against any agreed benchmarks. It will be particularly helpful for those larger schemes subject to the more extensive and detailed TCFD reporting requirements and for schemes with self-select funds so that better information can be provided to those members who choose to invest in sustainable funds.

The establishment of a general “anti-greenwashing” rule making clear that sustainability-related claims about products must be clear, fair and not misleadingall products is clear, fair and not misleading. This obligation will be even more acute where advice is provided on the range of self-select funds to be made available to DC scheme members.  To date, concerns about “greenwashing” have meant that some trustees have been reluctant to adopt ESG factors in their investment strategy, even where they are aware that such a strategy aligns with the views of their members. Anything that helps alleviate those concerns is welcome so that trustees can have greater certainty over the funds they select, particularly those that are described as ethical or sustainable funds for members choosing their own investments.  

. Again, clearer and more accurate information on this will help trustees better assess whether particular investments accord with their strategy. As the Financial Conduct Authority gears up for the introduction of the new Consumer Duty from the end of July, which will set out the standard of care FCA regulated firms should give to their customers in retail financial markets, including scheme members as the end user, there will be greater pressure on asset managers to ensure that the marketing information relating to

The FCA intends to publish its final rules and guidance in a Policy Statement by the end of the first half of 2023.  

We know it can be a real challenge for trustees to know whether they are meeting ESG expectations and requirements. That is why we have developed an ESG tool to help. In brief, it is an interactive guide which can help trustees navigate through the sources and identify which issues they may want to consider further. It aims to help trustees reflect on their own knowledge so that they can take steps to plug any gaps with training and advice and it also provides a general overview of some of the most important requirements. If you are interested in taking a look, it can be accessed here.

This blog was written with assistance from Lydia Morris and Catrin Young