LONDON, June 29 Reuters Issuers of bonds that raise cash for green projects should voluntarily apply industry standards to avoid hoodwinking investors, Britain39;s Financial Conduct Authority FCA said on Wednesday.

Bonds whose proceeds are used to finance sustainable activity passed the 1 trillion mark globally last year for the first time, the FCA said in a policy statement on integrating environment, social and governance ESG issues into UK capital markets.

Regulators globally are looking at how to limit greenwashing, or giving investors a flattering picture of sustainability as ESG funds attract trillions of dollars.

Green bond issuance in Britain, including government 39;gilts39;, totalled 53.5 billion last year, the largest market in Europe for the first time, the FCA said.

We are taking a measured approach to ESGlabelled debt instruments, with the aim of setting clear guardrails as the market continues to develop.

Issuers should consider voluntarily applying industry standards such as principles on green debt from the International Capital Market Association, a bond industry body.

There was no consensus on whether Britain should adopt a national green bond standard along the lines of norms being approved in the European Union, the FCA said.

Misleading advertisements for green bonds will face enforcement action, the FCA added.

The watchdog said it may consider regulating second party opinion SPO firms like Sustainalytics, Vigeo Eiris and ISS ESG used to…