The U.K. Sustainable Investment and Finance Association (UKSIF) has commended the U.K.’s proposed rules to eradicate greenwashing in investment funds, arguing that they set a higher bar than their EU counterpart.

In a January 10 response to a Financial Conduct Authority (FCA) discussion paper, the association, which represents more than $23 trillion in assets, said that the U.K.’s upcoming Sustainability Disclosure Requirements (SDR) will enhance transparency for investors.

UKSIF noted that the proposals are “a positive departure from the arguably looser criteria” for ESG fund categories set out in the EU’s Sustainable Finance Disclosure Regulation (SFDR), which it argued include an “unclear definition of sustainable investment.”

“We see opportunities for the U.K. should it establish a world-leading regime that can build on other jurisdictions’ frameworks, with potential for the U.K. to proactively shape other countries’ approaches to disclosures and labeling in the coming years,” the association said.

The Financial Conduct Authority, the U.K.’s financial watchdog, unveiled its ESG rules for funds in October last year, with a consultation concluding on January 25.

Under the new rules, self-proclaimed sustainable funds would be required to fit into one of three categories. Sustainable Focus funds invest mainly in assets that achieve a high standard of sustainability. Sustainable Improvers cover investments in assets that may not be sustainable now, but which the fund aims to help improve. Finally, Sustainable Impact funds are able to prove they’re targeting solutions to social and environmental challenges.

UKSIF argued that the Sustainable Improvers label needed clarification on appropriate metrics to help define what an improving fund looks like in practice. It warned that failure to do so risks it becoming a “catch all” label, with some funds exaggerating the impact of their engagement activities.

The association also recommended that the FCA should clarify how the rules will impact overseas funds as soon as possible, warning that products registered in the EU and marketed in the U.K. could have an unfair advantage. It also argued that the U.K. government should enforce appropriate corporate disclosure obligations so investors can evaluate companies’ sustainability credentials.