New Zealand Updates Sustainability Disclosure Guidance for Financial Product Issuers

Key Takeaways

• Updated Sustainability Guidance: The Financial Markets Authority released updated guidance clarifying how existing disclosure and fair-dealing obligations apply to financial products with sustainability-related characteristics.
• Four Core Principles: The guidance is built around four principles requiring sustainability-related claims to be clear, substantiated, consistent across communications, and supported by effective management of third-party involvement.
• Focus on Investor Clarity: The FMA said the guidance is intended to help investors better understand sustainability-related claims tied to investment products so they can make informed investment decisions.
• No New Investment Requirements: The regulator stressed the guidance does not direct issuers how to invest or create new investment obligations, but issuers must ensure sustainability-related promotions are not misleading and disclose all material information.
• Updated Market Terminology: The guidance was renamed Sustainability-related disclosure guidance following consultation feedback to better reflect current market practice.

Deep Dive

New Zealand’s Financial Markets Authority has released updated guidance aimed at giving issuers clearer direction on how to disclose and communicate financial products with sustainability-related characteristics.

The guidance sets out how existing fair-dealing and disclosure obligations apply when issuers promote sustainability-related features in their products, including environmental, social or value-based considerations.

Louise Unger, the FMA’s Executive Director Response and Enforcement, said the updated guidance is intended to support clearer and more accessible information for investors.

“The updated guidance supports issuers to provide investors with clear and accessible information on financial products with sustainability-related characteristics, such as environmental, social or value-based considerations, so investors can be confident that what they are investing in aligns with their investment objectives,” Unger said.

The FMA said the guidance is built around four core principles. Claims need to be clear, claims need to be substantiated, messages need to be consistent, and third-party involvement needs to be effectively managed.

The updated document follows consultation on an earlier draft. The FMA said changes were made throughout the guidance in response to feedback, though the underlying principles have not changed. As part of those changes, the guidance has been renamed Sustainability-related disclosure guidance to better reflect current market practice.

Unger said investors need enough information to understand the nature of sustainability-related claims made about a product before making investment decisions.

“It’s important that investors have the information they need to understand the nature of the sustainability-related claims made about a product so they can make well-informed decisions about their investments,” she said.

The regulator emphasized that the guidance does not tell issuers how to invest. Issuers remain responsible for their own investment decisions, but must ensure that any promotion of sustainability-related characteristics clearly discloses all material information and is not misleading.

The updated guidance replaces the FMA’s earlier guidance from the 2020 Disclosure Framework for Integrated Financial Products and review observations from the 2022 Integrated Financial Products: Review of Managed Fund Documentation.

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