FMA to weed out green washing

Fund managers offering green or ESG funds will have to prove to regulators they are delivering what they say they are.

Friday, February 7th 2020, 8:22AM

Rob Everett

Financial Markets Authority chief executive Rob Everett fund managers promoting their funds as "green" or using ESG principles will need to prove that they do what they say.

"We want to take a look at investments branded as green or ESG," he told an audience in Auckland last week. "Like everywhere else, we’re seeing greater demand from investors for these types of investments. We also see the focus on how the finance sector can assist in shifting the global economy to a more sustainable footing."

"Part of our work here is about ensuring people understand what they’re investing in and that they get what’s labelled on the tin. Just calling a product green or responsible, or labelling it sustainable finance without any proof or any sort of contractual commitment risks a mis-selling charge."

"We are mindful of the MBIE/MfE consultation on climate-related disclosures, and wherever that lands we will be looking to ensure that listed issuers consider the risks (and opportunities) to their business models and profitability from climate change."

He says the Council of Financial Regulators (which is made up of FMA, Reserve Bank, Commerce Commission, Treasury and MBIE) should contribute to transitioning to a low-carbon economy.

"So sustainable finance is a key product area for us and CoFR has a specific multi-agency workstream underway on it."

Everett says this is part of the regulator's plans to look more closely at how providers are delivering to investors, partiuclarly KiwiSaver members – and whether what they say measures up to what was promised.

While green/ESG funds are one area of interest so too is active and passive management styles. "We are seeking to develop a better understanding of the different investment styles – such as active and passive – and to focus attention on whether KiwiSaver members are getting what they pay for," he says.

Tags: Active v Passive ESG FMA Rob Everett