FCA introduces new anti-greenwashing rules

The UK Financial Conduct Authority has confirmed new rules designed to increase the transparency of sustainable investing and reduce greenwashing.

The new Sustainability Disclosure Requirements that relates to sustainable investment labels will come into effect from the 31 May 2024. Firms can use the investment labels from 31 July 2024. The naming and marketing rules for asset managers come into effect from 2 December 2024.

The FCA says the new rules will protect consumers by helping them to make more informed decisions when investing and enhance the credibility of the sustainable investment market. The FCA says a lack of consistency relates to terms such as ‘green’, ‘ESG’ or ‘sustainable’ where there may be “exaggerated, misleading or unsubstantiated claims” about the sustainability credentials of products. The new rules mean products cannot be described as having a positive impact on sustainability when they don’t.

The FCA will introduce:

  • An anti-greenwashing rule for all authorised firms to make sure sustainability-related claims are fair, clear and not misleading
  • Product labels to help investors understand what their money is being used for, based on clear sustainability goals and criteria
  • Naming and marketing requirements so products cannot be described as having a positive impact on sustainability when they don’t

The labelling regime, known as the Sustainability Disclosure Requirements, includes four sustainability labels for UK funds which asset managers will be able to choose from to describe their funds. The four new fund labels are Sustainability Impact, Sustainability Focus, Sustainability Improvers and Sustainability Mixed Goals

Sacha Sadan, Director of Environmental, Social and Governance, FCA, says, “We’re putting in place a simple, easy to understand regime so investors can judge whether funds meet their investment needs – this is a crucial step for consumer protection as sustainable investment grows in popularity. By improving trust in the sustainable investment market, the UK will be able to maintain its position at the forefront of sustainable finance, and capture the benefits of being a leading international centre of investment.”