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The Financial Conduct Authority (FCA) confirms a new anti-greenwashing rule as a part of its Sustainability Disclosure Requirements (SDR).
Introduced on April 23, 2024, the new rule aims to ensure the labeling and descriptions of sustainability-oriented financial products and services are accurate.
The FCA's anti-greenwashing guideline will come into force on May 31 2024, which leaves companies roughly one month to implement the final guidelines to ensure compliance.
Let’s look at what financial services firms need to know.
What are the anti-greenwashing rules?
The anti-greenwashing rule is a set of requirements that all firms authorized by the FCA need to follow to ensure transparent and accurate sustainability claims are made regarding financial products and services and are not misleading consumers.
If the FCA finds that a firm is making unsubstantiated sustainability claims, it has the explicit right to challenge them and take supervisory or enforcement action.
You can find the FCA’s guidelines here.
Who needs to comply with the anti-greenwashing rule?
All FCA-authorized financial services firms with clients in the UK must comply with the new rule.
The FCA is consulting with portfolio managers across the industry to help establish the requirements on how sustainable investments should be labeled and explained.
The proposed labeling and Sustainability Disclosure Requirements (SDR) for portfolio managers include the following:
* Specific labels on products designed to help consumers understand what they are purchasing or investing in.
* Marketing positive outcomes from products can be employed only if those claims can be backed up.
How to comply with the anti-greenwashing rule?
The FCA directs firms to receive guidance from regulatory bodies like the Advertising Standards Authority (ASA) and Competition and Markets Authority (CMA). However, it's important to note that the anti-greenwashing rule has broader principles within the FCA Handbook.
In addition, the FCA points out that most firms do not need to introduce new requirements in their compliance practices as they should already be ensuring their sustainability-related claims are "fair, clear and not misleading."
Next steps for the FCA’s anti-greenwashing rule
The new anti-greenwashing rule goes into effect starting May 31, 2024.
The FCA stated it will continue to provide industry support on the implementation of the regime through continued dialog with stakeholders over the next few months.
Read more about the FCA rule change: FCA confirms anti-greenwashing guidance and proposes extending sustainability framework.
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