Clearer expectations for sustainability labels and claims
The Financial Markets Authority has updated its sustainability‑related disclosure guidance, sharpening expectations on how issuers promote financial products with environmental, social or values‑based characteristics.
Rebadged as sustainability‑related disclosure guidance, the note replaces the 2020 Disclosure Framework for Integrated Financial Products and earlier thematic work on managed fund documentation. It explains how existing fair‑dealing and disclosure obligations under the Financial Markets Conduct Act apply when sustainability‑related features are used in product names, marketing or offer documents.
FMA executive director response and enforcement Louise Unger (pictured) said the update is aimed at improving transparency for investors.
“It’s important that investors have the information they need to understand the nature of the sustainability-related claims made about a product so they can make well-informed decisions about their investments,” Unger said.
The guidance organises FMA expectations into four key principles: claims must be clear, capable of being substantiated, consistent across all disclosures, and supported by effective oversight of any third‑party data or managers.
Greenwashing risk and the ‘overall impression’ test
FMA reiterates that “greenwashing refers to false or misleading claims about the sustainability-related practices associated with a particular product or issuer that make the offering appear more ‘green’ or socially responsible than it actually is".
That definition underpins the regulator’s warning that headline promises about “green” or “ethical” strategies must align with what the product actually holds and how mandates are implemented in practice.
The guidance emphasises that regulators will focus on the overall impression created by product disclosure statements, websites and advertising, rather than isolated technical wording. If exclusions, positive screening or stewardship only apply to part of a portfolio, or if derivatives provide indirect exposure to sectors that are otherwise screened out, this needs to be clearly explained.
Practical examples in the document highlight common pressure points, including funds that promote fossil‑fuel exclusions while still holding transition names, and green bonds where only a portion of proceeds goes to qualifying projects.
Implications for sustainable product design
While the document is directed at issuers rather than advisers, it sets a higher reference point for what good practice ESG disclosure looks like in New Zealand’s capital markets.
Unger said issuers remain responsible for their investment decisions but must ensure that “any promotion of sustainability-related characteristics clearly discloses all material information and is not misleading.”
For mortgage and finance professionals, the guidance provides a clearer framework for interrogating product labels and supporting clients who want investments aligned with climate or social goals alongside traditional considerations such as mortgage rates, borrowing capacity, and long‑term wealth creation.
Follow this link for the FMA announcement.
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