The FCA said on Tuesday that it plans to extend its anti-greenwashing labelling rule for sustainable investments.

The move comes in ahead of the anti-greenwashing rule coming into force on 31 May.

George Latham, managing partner of WHEB Asset Management, said: "Given the importance of model portfolio services (MPS), it is critical that the FCA extend the sustainability disclosure requirements (SDR) to this part of the market.

“We are pleased to see the consultation paper and the strong degree of alignment with the Policy Statement PS23/16 including on thresholds, consumer disclosures and timelines. We understand the pragmatic approach of treating each underlying fund as an asset but the 70% threshold that applies to underlying funds should be seen as a floor and not a ceiling in our view.”

He said that WHEB will continue to provide all the underlying data on its investments that will be needed by MPS providers to underpin their use of the sustainability labels.

Gemma Woodward, head of responsible investment at Quilter Cheviot, said: “The FCA extending its sustainability disclosure requirements to portfolio management is the logical next step in the process. Having consistency across the investment landscape is going to be critical if the SDR labels are to be a success and that customers are not misled on the sustainable credentials of their portfolios.”

She pointed out that portfolio management services, either model portfolios or bespoke offerings, have become increasingly popular in the last decade so it is important consumers and advisers can accurately compare services.

She said: “This is a far-reaching piece of regulation from the FCA and as such it requires careful navigation. As the industry evolves, additional clarification on what can and cannot be said, particularly around the naming and marketing of funds and portfolios, will be crucial.” She added that this will work both ways so that the industry avoids ‘green hushing’ as much as preventing greenwashing.

Green hushing is where an investment underplays its sustainable credentials so as not to inadvertently overstep the mark. It is a phenomenon already seen in the US and it is vital that we do not see it creep into the UK, said Ms Woodward.

She said Financial Planners and advisers must ensure they are up to speed and trained in this area of investments.

The PFS has just launched a course on SDR and anti-greenwashing to help.