The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – is seeking feedback on updated draft guidance for financial products with ethical characteristics. The updated guidance will help issuers consider how they present their products in disclosures and advertising on ethical claims.
FMA Executive Director of Response and Enforcement, Louise Unger, said: “Our research has shown that ethical investment opportunities are increasingly important for investors. However, investors don’t always investigate the underlying details of their investments, and understandably place a lot of trust in issuers to deliver the advertised benefits of ethical investment products.
“Ethical investment disclosures are a priority for us, as outlined in our Financial Conduct Report. We want to encourage issuers to provide clear, concise, and effective disclosure when they incorporate values-based or ethical factors into their financial products, which means including all material information and ensuring they avoid being misleading or deceptive,” said Louise Unger.
“We also want investors to be able to rely on the claims made by issuers and make well-informed decisions about their investments. There is a risk that confusing, unclear, and inconsistent disclosure and advertising for ethical investment leads to uninformed investor decision-making and damages trust and confidence in ethical products.”
“Today, we have issued updated draft guidance that seeks to be clearer about the FMA’s expectations around ethical investing disclosure, including;
- Being more specific about how we consider fair dealing provisions apply when explaining common ethical investing practices,
- Providing practical examples of conduct we consider is likely to be misleading,
- Providing corresponding examples of good practice we have seen around ethical investing disclosure,
- Retiring the term “Integrated Financial Products” as this terminology suggests a narrower focus than what our guidance applies to, which is all types of ethical investing decisions.
“We are not trying to tell market participants how to invest ethically. Issuers remain best placed to make those investment decisions.
“However, as this is a developing area with constantly evolving practices, we do believe we have a role to play in guiding issuers with what our expectations are to help them avoid ‘greenwashing’.”
We want to hear from industry participants if our guidance is useful and helps them be clearer in their own disclosure practices.
Once it has been finalised, we will work with industry to embed the guidance and improve practices through feedback and insights.
This guidance updates and replaces guidance previously issued in the 2020 Disclosure Framework for Integrated Financial Products and guidance contained in the 2022 thematic review of managed fund documentation.
The updated guidance consultation follows the FMA’s 2024 publication of insights findings gained from reviewing 10 managed investment scheme (MIS) funds’ disclosure documents, advertising, reporting on sustainability progress, and whether investments held by funds align with their sector exclusion policies.
The draft guide can be found here on our website and consultation is open until 7 November.
