Introduction

The Financial Markets Authority (FMA) issued this guidance to clarify expectations for issuers of financial products describing sustainability-related characteristics. It explains how the fair dealing provisions in Part 2 and the disclosure obligations in Part 3 of the Financial Markets Conduct Act 2013 (FMC Act) apply. The guidance covers all external communications, including product disclosure statements (PDS), websites, apps, reports and marketing material.

Terminology

“Sustainability-related” is used broadly to capture instances where issuers incorporate factors beyond strict financial performance, including values. Products may integrate environmental, social and governance (ESG) characteristics and be marketed as ‘ethical’, ‘green’, ‘sustainable’, ‘impact’ or similar terms.

The sustainable investing environment

Greenwashing refers to false or misleading claims that make an offering appear more ‘green’ or socially responsible than it actually is. Greenhushing occurs when issuers deliberately limit public communication about their sustainability-related practices, which may itself be misleading if material information is omitted.

Statutory duties

The fair dealing provisions in Part 2 prohibit misleading or deceptive conduct and false, misleading or unsubstantiated representations. PDS documents must be clear, concise and effective. The FMA may issue a stop order to prevent disclosure likely to confuse investors — a lower threshold than ‘likely to mislead’.

Role of market standards and taxonomies

Standards such as the ICMA Green Bond Principles and the UN Principles for Responsible Investment (PRI) can help issuers communicate their practices. There is currently no requirement in New Zealand to claim alignment with any standard. The New Zealand Government is developing a voluntary sustainable finance taxonomy, initially focused on agriculture and forestry.

Our regulatory approach to sustainability-related disclosure

The FMA prioritises engagement and education but will use its regulatory powers where disclosures are materially misleading, deceptive or unsubstantiated and where expectations are already clear.

1. Claims need to be clear

The overall impression from an ordinary and reasonable investor’s perspective must not be misleading, including through omissions. Issuers should disclose specific targets, timeframes, and how progress will be measured and reported (p.10). Risks specific to the sustainability-related strategy must be disclosed (p.12), as must breach consequences (p.13) and material strategy changes (p.14).

Negative screening disclosures must explain the scope, thresholds and any exceptions, including treatment of derivatives and underlying funds (pp.15–19). Positive screening requires disclosure of methodology and score thresholds (p.20). Stewardship claims must accurately reflect whether voting is exercised directly or by an outsourced provider (p.20). Use of te reo Māori and Māori values must be clearly explained and applied in practice (p.21).

2. Substantiate your claims

Issuers must have reasonable grounds for all claims at the time they are made. Sustainability-related product labels such as ‘green’ or ‘sustainable’ imply those characteristics are a primary or key objective. Claims should be substantiated through external review or assurance and timely measurement and reporting.

3. Messages need to be consistent

Messaging must be consistent across all platforms and documents. Advertising carries heightened risk of creating a misleading impression through omission. Any linked content must be correct, current and directly accessible.

4. Third-party involvement is effectively managed

Issuers retain full responsibility under financial markets legislation regardless of third-party delegation. Issuers should regularly spot-check third-party data and screening accuracy. Third-party assurance or certification should be clearly disclosed, including the standard assessed, scope, reviewer identity and whether the report is publicly available.