Financial services provider Apex Group has praised the UK regulator's appetite for tackling greenwashing and ensuring transparency in the sector.
The Financial Conduct Authority (FCA), in its March 20 "Dear CEO" letter, warned prominent ESG benchmark administrators of regulatory action due to the "potential for widespread failings" specified as part of a preliminary regulatory review.
The FCA note prompted CEOs that sustainability-related claims must be transparent, fair and not misleading, stressing that the anti-greenwashing rule proposed under SDR will apply to benchmark providers.
"There were often instances where benchmark administrators did not provide sufficient details and description of the ESG factors considered in their benchmark methodologies," the letter read.
Commenting on the regulator's concerns, Andy Pitts-Tucker, global head of product at Apex Group, underlined the need for diligence.
"We would encourage benchmark administrators to carefully consider the finding of this preliminary review and consider how they relate to their business," he said.
"Lack of rigorous benchmark methodologies harms the reputation and perception of the whole ESG ecosystem in the long-term and will undermine attempts to drive positive change towards a more sustainable future."
Commending FCA's "renewed scrutiny" on the sector, he highlighted a growing pressure on regulators from investors to ensure benchmark methodologies are sound alongside continuous efforts to crack down on greenwashing.
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