The move could see nearly all funds and investment products labelled by ESG and sustainable criteria.

The labels could apply to both fund managers and individual funds and could potentially be extended to financial advisers.

The FCA discussion paper says: "In addition, we are exploring the best approach to introducing requirements for financial advisers, in due course."

The watchdog has published its proposals in Discussion Paper DP21/4 today to coincide with COP26 Finance Day in Glasgow.

The Discussion Paper forms part of the FCA’s new ESG Strategy released today. The strategy sets out the FCA’s role in "supporting the transition to a more sustainable economy."  

The news comes as Chancellor Rishi Sunak addressed the COP26 conference today and promised the UK’s finance sector would be the first in the world to reach net-zero carbon emissions and finance firms would be compelled to publish their progress on this.

The FCA will invite views on potential criteria to “classify and label” investment products. The labelling will help consumers “navigate their sustainability characteristics,” the FCA says. 

The FCA is asking for feedback on provide level and product-level disclosures. It plans to leverage existing initiatives to ensure coherence with market practice and other regulation. 

New policies may emerge in the Spring, the regulator says. 

The watchdog says it is “committed” to helping investors put environmental, social and governance (ESG) matters “at the heart” of their investment decisions.  

In its most recent Financial Lives survey, the FCA found that 80% of respondents wanted their money to “do some good” while also providing a financial return and 71% wanted to, “invest in a way that is protecting the environment.” Some 71% said they would not put their money into investments which are unethical.   

FCA CEO Nikhil Rathi said: “'It is vital that we innovate to support industry’s shift to a more sustainable future. That is why the FCA has been leading from the front. Developing consistent, trusted standards are a vital part of that, giving investors the confidence to put their money where it can deliver the most sustainable outcome.  

“The strategy we have published today puts these standards front and centre, supported by supervision and enforcement where firms fail to meet them." 

Speaking at COP26, Nikhil Rathi will also announce that the FCA will confirm final rules, which align to TCFD standards, on disclosures for a wider scope of listed issuers, as well as asset managers, life insurers and FCA-regulated pension providers, by the end of 2021.  

• FCA documents: Discussion Paper: Sustainability Disclosure Requirements and investment labels  A strategy for positive change: our ESG priorities