New Zealand’s FMA is seeking feedback on how responsible investment products should be described, labelled and promoted to investors.
New Zealand’s FMA (Financial Markets Authority) is seeking views on how green bonds and other responsible investment products should be described, labelled and promoted to investors.
There is a growing demand for sustainable or responsible investment products, according to FMA general counsel and acting co-head of capital markets, Nick Kynoch.
“In response, issuers and providers are now offering an increasing array of products. While the FMA supports the development of the market for these products, there are associated risks and issues, largely arising from the lack of common understanding of what makes an investment responsible,” Kynoch said.
The FMA wants feedback on how to provide investors with a clear understanding of what they are being offered and the risks involved – in advance publishing official guidance for the market.
“With the growing popularity of these products we want to ensure investors are protected from ‘greenwashing’ and have a clear understanding of what is on offer,” said Kynoch. “They should be able to determine just how green, ethical, or responsible a financial product is.”
The FMA’s guidance will set out prescriptive definitions of ‘green’, ‘ethical’ or ‘responsible’ – as well as expectations for issuers and product providers about good conduct and good disclosure so investors can make an informed choice.
Currently, all regulated offers, including those for responsible investment products, must explain features, benefits and expected returns to investors, as well as comply with fair dealing provisions which prohibit misleading or deceptive conduct, false or misleading representations and unsubstantiated statements in relation to all offers of financial products and services.
“We are satisfied the current law is flexible enough to accommodate responsible investment products,” said Kynoch. “But in an area like this, with a lack of consistent, agreed-upon definitions, we are keen to benchmark what good conduct and good disclosure look like, to ensure issuers focus on meeting investor needs.”
The draft guidance, available here, is open for comments until 24 October 2019.
The FMA expects to publish the final guidance by year-end, along with information for investors about the risks and features of different kinds of responsible investments, and questions they should ask product and service providers before investing.
Source: Regulation Asia