25 March 2025 – BSI has published new guidelines for fund managers, developed through a collaborative effort between industry leaders and government, designed to strengthen the integrity of sustainable investments and address the escalating issue of greenwashing in the financial sector.
The standard, Sustainable investment funds – Design, implementation, monitoring and communication of sustainability attributes – Specification (PAS 7342:2025), sets out clear requirements for fund managers to design, manage, and communicate sustainable investment funds responsibly. The guidance aims to provide critical tools to ensure funds align with their stated objectives and maintain investor confidence.
PAS 7342, part of BSI’s suite of sustainable finance standards, builds on the foundation laid by PAS 7340 (on embedding the principles of sustainable finance in financial services organizations) and PAS 7341 (on responsible and sustainable investment management). It offers a clear framework for sustainable funds and aims to empower fund managers to demonstrate strong governance in investment selection, as well as their adherence to recognized good practice, helping to enable a transparent and consistent approach.
The specification is designed to help fund managers strengthen their engagement with both current and prospective investors, while fostering continuous improvement in managing sustainable funds. It also covers designing sustainable investment strategies, communicating intent and outcomes, governance and monitoring, verification and labelling, as well as intermediary and investor communication.
The standard also aims to plays a critical role in helping organisations avoid greenwashing (where organizations make misleading claims about the environmental benefits of products or practices) by establishing clear guidelines, such that funds marketed as sustainable genuinely align with good practices. In December 2024, research found that 85% of investors were identifying greenwashing about company sustainability performance as a greater problem than five years previously[1].
Complementing the Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements, this standard is consistent with regulatory frameworks and offers clear guidance in relation to sustainable investments. PAS 7342 also reinforces the need for funds claiming to contribute to net zero targets to demonstrate tangible alignment with those claims.
Daan van der Wekken, Head of Sector – Sustainability, BSI, said: "The Sustainable Investment Funds standard PAS 7342 aims to set a new benchmark in sustainable investing, empowering fund managers to ensure transparency, integrity, and genuine alignment with sustainability goals.
“In the UK, amidst a proliferation of sustainable fund labels and various attempts to codify what constitutes good sustainable investing, this standard is designed to addresses the critical gap and provide the clarity and consistency needed to help fund managers navigate this complexity. This could be a key step in combating greenwashing in finance, accelerating progress towards a sustainable world by ensuring accountability in sustainable investments and helping investors make informed decisions."
Stephanie Glover, Director of Strategy and Sustainable Finance at Guernsey Finance said, “Sustainable Finance is a golden thread that runs through every sector of Guernsey's specialist financial services industry. As a responsible global citizen, it is Guernsey's intention to contribute its expertise and experience as an international finance centre to the cause of sustainable finance. That is why Guernsey Finance was proud to sponsor the most recent BSI PAS standard, the latest in a suite of sustainable finance initiatives.
“The standard provides requirements and guidance for fund managers on designing, implementing and communicating sustainable investment fund sustainability attributes. Developed by industry experts, the PAS can help fund managers to implement good practice and good governance and combat greenwashing, as well as helping wealth managers and advisors to determine which funds are most closely aligned with client requirements.”
You can find further information on PAS 7340 PAS 7341 and PAS 7342 here.
This PAS was sponsored by industry organizations, including Guernsey Finance, Impax Asset Management, IP Group, Royal London and Scottish Widows, and by the Department for Energy Security and Net Zero (DESNZ). Its development was facilitated by BSI Standards Limited and it was published under licence from The British Standards Institution.
Acknowledgement is given to Julia Dreblow (Riches), SRI Services, as the technical author, and the following organizations that were involved in the development of this PAS as members of the Steering Group:
- CFA Society UK
- Baillie Gifford
- Consumer and Public Interest Network
- Department for Energy Security and Net Zero (DESNZ)
- Granito Group
- Impax Asset Management
- IP Group
- Legal and General Investment Management
- MSCI ESG Research
- P1 Investment Management
- Scottish Widows
- SRI Services
- Rowe Price International Ltd
- WHEB Group
[1] 85% of Investors Say Greenwashing is a Growing Problem: EY Survey, ESG Today, December 2024
