New regulatory powers Sustainability disclosure in financial services
Green finance is an essential part of the government’s vision for the UK financial system and is seen as a fundamental part of the government’s strategy to achieve Net Zero. Mobilising Green Investment: 2023 Green Finance Strategy  sets out the government’s policy to strengthen the UK’s position at the forefront of the rapidly growing global green finance market, while driving private investment to deliver our energy security, net zero and environmental objectives.
	Robust, comparable sustainability information is required to enable informed and efficient capital allocation that can support the UK’s climate and environmental goals. Investors and other stakeholders are demanding more and better information to better assess long term risks and returns, and whether their investments will support their sustainability preferences.
	Claims about sustainability are made by a growing number and range of financial firms about their products, and many UK companies are making commitments to transition their activities to net-zero. In 2021, 49% of UK assets under management integrated environmental, social and governance (ESG) factors into their investment decisions, up from 37% in 2020. The number of ‘sustainable funds’ available in the UK has grown from under 50 in 2005 to 167 in 2020.
	This growth, however, has also led to an increased risk of "greenwashing", which is when misleading or unsubstantiated claims about environmental sustainability are made by organisations about their products or activities. Greenwashing and transparency were frequently cited concerns amongst respondents to the 2021 Schroders Institutional Investor Study. 6 This can lead to the wrong products being bought, potentially harming consumers, undermining trust in the market and frustrating investors’ efforts to support the transition to net zero through their investments. It can also undermine the government’s efforts in the public interest to support the transition to a low carbon economy.