Ethical investing disclosure guidance
This report summarises draft guidance from New Zealand’s Financial Markets Authority on ethical investment disclosure. It sets expectations under the FMC Act, warns against greenwashing, and outlines principles of clarity, substantiation, consistency, and management of third-party involvement to improve transparency and accuracy for investors.
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OVERVIEW
Role of market standards and taxonomies
Market standards such as the ICMA Green Bond Principles, UNPRI, CFA Institute definitions, and the EU taxonomy provide reference points. In New Zealand, no formal requirement exists, though the Government is developing a voluntary taxonomy for agriculture and forestry. Issuers may also use private certification, but standards vary and are not regulated.
Ongoing supervision
The FMA will support issuers through engagement and education but will intervene where conduct or disclosure is materially misleading. It has a range of responses, from guidance to enforcement action.
The guidance sets out four key principles of ethical investing
- Claims need to be clear: Claims must be precise, avoiding vague statements. Both positive statements and omissions affect overall impression. Examples highlight the risks of overstating exclusions or failing to disclose exceptions. Good practice includes disclosing screening methods, thresholds, exceptions, and treatment of subsidiaries and derivatives. Transition-focused products must disclose how “transition” is defined and monitored. Risks and breach consequences should also be stated.
- Substantiate your claims: Issuers must have reasonable grounds for claims, supported by evidence. Ethical labels should only be used where ethical factors are a significant consideration. Good practice includes external assurance, clear measurement, regular reporting, and use of recognised standards.
- Messages need to be consistent: Messaging across all documents and advertising must align. Definitions should be applied uniformly, and information should not contradict itself. Updates to strategies must be reflected in the SIPO and PDS. Marketing should not omit key limitations, even where space is restricted.
- Third-party involvement is effectively managed: Where data providers, delegated managers, or certifiers are used, issuers remain responsible for compliance. Good practice involves disclosing providers, explaining methodologies, and highlighting any differences across asset classes. Certification should be described transparently, including its scope, timing, and any limitations.
Financial advice about ethical investing
Advisers must ensure clients understand the scope and limitations of advice, manage conflicts of interest, and act with care and diligence. They should understand methodologies behind ESG ratings and standards to verify product claims. Products recommended must comply with FMC Act requirements, and advice must be transparent, fair, and tailored to client values.
