FMA Publishes Ethical Investing Disclosure Insights Update

The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has today published insights from its supervision of funds that claim to have ethical features. The insights are based off findings from reviewing disclosure documents, advertising, reporting on sustainability progress, and whether investments held by funds align with their sector exclusion policies.

The insights follow the FMA’s 2022 thematic review of how managed investment scheme (MIS) managers had applied the FMA’s disclosure framework for integrated financial products guidance issued in 2020. Ethical investment claims must comply with the fair dealing provisions in Part 2 of the Financial Markets Conduct Act 2013.

The FMA did not identify any situation where an issuer deliberately used ethical labelling or marketing without intending to implement an ethical investment strategy. It did see examples of confusing, unclear and inconsistent disclosure that may have made it difficult for investors to understand the product or whether ethical claims were being adhered to. The FMA provided feedback to all 10 MIS managers reviewed on areas for improvement, and the insights publication notes good practices for other issuers to consider.

FMA Executive Director of Response and Enforcement, Louise Unger, said: “FMA research has shown that investors don’t always investigate the underlying details of funds, and understandably place a lot of trust in issuers to deliver the advertised benefits of ethical investment products. It is therefore important for the FMA to maintain oversight of ethical investing disclosure, and this is now part of our business as usual supervision approach.”

Next steps

The FMA will engage with the market about how to best update its 2020 guidance. This will be a longer-term project, where we will seek views and insights from across the financial sector before drafting any proposed guidance.

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. We also want investors to be able to rely on the claims made by issuers and make well-informed decisions about these issues.

The FMA welcomes engagement from anyone who wishes to share their views about what guidance on ethical investing should address. If you wish to indicate your interest and/or share your views on what FMA ethical investing guidance should include please email consultation@fma.govt.nz with the subject line “Ethical Disclosure Guidance.”

Download the Ethical Investing Disclosure Insights PDF

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