FCA anti-greenwashing rule comes into effect

The Financial Conduct Authority's (FCA) new anti-greenwashing rules come into force from 31 May 2024.

The rule accompanies the FCA's Sustainability Disclosure Requirements (SDR) regime - the UK's flagship ESG regime. The SDR regime is primarily a product labelling regime and includes guidance and rules on investment labels and disclosures, naming and marketing rules for UK assets managers, and rules for distributors of investment products to retail investors in the UK.

The new anti-greenwashing rule applies to all FCA-authorised firms, not just investment products or asset managers, and seeks to ensure consumers are protected from misleading sustainability-related claims, by enabling them to make informed decisions aligned with their sustainability preferences.  

When a regulated institution (for example a bank):

• communicates with clients in the UK in relation to a product or service;
• provides information on a financial promotion; or
• approves a financial promotion for communication, to a person in the UK,

then the regulated institution must ensure they are complying with the new anti-greenwashing rule.

It places an emphasis on obligated parties to fact check their sustainability claims. Any claims made should follow the four C's referred to in the FCA guidance, and ensure that any references to sustainability are:

• correct and capable of being substantiated;
• clear and represented in a way that can be understood;
• complete, and not omitting or hiding important information, as well as giving consideration to the full life cycle of the product or service;
• comparisons made to any other products or services are clear and meangingful.

The FCA's guidance on the new rule says it applies to all communications about financial products or services which refer to the environmental or social characteristics of products or services: “Sustainability-related references could be within statements, assertions, strategies, targets, policies, information, and images.”

All claims made by financial services companies about their products and services must be fair, clear and not misleading, and those who fail to comply could face supervisory action by the regulator. 

Following a 2023 consultation into the new SDR regime and the anti-greenwashing rule, there were calls by some respondents to delay the implementation date (31 May 2024) by six months. This has not happened and the FCA has justified not doing so, stating:

“For most firms, the rule does not introduce a new requirement as they should already be ensuring their claims are ‘fair, clear and not misleading’ under existing FCA requirements. [...] We are therefore not introducing an additional transition period for the guidance.”

For more information, see:

• Finalised non-handbook guidance on the anti-greenwashing rule - FG24/3.