As concerns over greenwashing continue to rise, new guidelines have been introduced to ensure that sustainable investment funds truly live up to their claims.
The British Standards Institution (BSI) has published PAS 7342:2025, a new framework designed to help fund managers create, manage and communicate sustainable investment funds responsibly—closing the loopholes that have allowed misleading environmental claims to thrive in the financial sector.
Greenwashing, where companies exaggerate or misrepresent their sustainability credentials, has become a growing issue for investors.
A December 2024 study found that 85% of investors believe greenwashing has worsened over the past five years, eroding trust in sustainable finance.
In response, PAS 7342 sets out clear, standardised requirements that fund managers must follow to ensure their investments align with genuine environmental and ethical objectives.
The new guidelines are part of a broader initiative to bring more transparency and accountability to sustainable finance.
Building on earlier BSI standards, which established principles for responsible investing, PAS 7342 goes further by introducing stricter governance measures.
Fund managers will now need to provide clear evidence that their investment strategies align with sustainability goals, undergo rigorous monitoring and accurately communicate their impact to investors.
One key focus of the standard is verification and labelling. Many funds market themselves as “green” or “sustainable” without clear proof of their environmental contributions.
PAS 7342 requires fund managers to back up these claims with robust evidence, helping investors distinguish between genuinely sustainable funds and those engaging in greenwashing.
The new framework also aligns with the Financial Conduct Authority’s Sustainability Disclosure Requirements (SDR), ensuring that the guidelines are consistent with regulatory expectations. By integrating these standards into investment practices, fund managers can demonstrate a genuine commitment to sustainability rather than using vague or misleading claims to attract investors.
Ultimately, PAS 7342 is a step towards restoring trust in sustainable investments. As more investors demand greater transparency, these guidelines will help ensure that funds marketed as “green” are held accountable—protecting both the environment and those who invest in it.
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.
“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.”
