This month, the FCA published new guidance to help companies to comply with the anti-greenwashing rule which will come into effect on 31 May. The rule is being implemented to give consumers confidence that claims about the positive social or environmental impacts of financial products or services are accurate. The FCA is currently consulting on extending a similar set of rules to portfolio managers.
The anti-greenwashing rule was introduced as part of the FCA’s Sustainability Disclosure Requirements (SDR) and investment labels regime in November 2023. It applies when an FCA-authorised firm communicates with UK clients about the sustainability characteristics of a financial product or service or a financial promotion.
For asset managers who will be subject to the anti-greenwashing rule from the start of June, the new FCA guidance can assist them in striking the balance when making sustainability-related claims about their products and services to ensure that they don’t fall fowl of either greenwashing or greenhushing.
The guidance includes examples to clarify how firms can ensure that their claims:
- are accurate and capable of being substantiated
- are explained in a way that can be easily understood by the intended audience
- include all relevant information
- make fair comparisons with other products or services.
While the rule may be new, concern about greenwashing is not. 2023 saw a proliferation of investigations by the Competition and Market Authority into misleading green claims made by companies in relation to the sustainability of their products. The legal and regulatory landscape around greenwashing continues to evolve, meaning that the stakes for getting it wrong are becoming higher.
Greenwashing is not just a marketing or advertising issue. It is a governance issue too. It depends on the ESG-literacy of the board, the integrity and completeness of an organisation’s reporting, and the extent to which an organisation chooses to undertake and embed strategic sustainability activity – and to be transparent about that activity. At CGIUKI, we seek to support people working in governance in any type of organisation to equip themselves and their boards to tackle greenwashing. Effective governance practices help to ensure that organisations are taking concrete steps to prevent greenwashing.
With that in mind, our thought-leadership paper, Tackling greenwashing from a governance perspective, is a must-read for anyone working in governance and seeking to navigate the complex landscape of ESG scrutiny. It covers:
- What are the different forms of greenwashing?
- How is greenwashing a governance issue?
- Why is greenwashing problematic?
- What are the existing and upcoming laws and regulations about greenwashing?
- What are the risks for organisations which are accused of greenwashing?
- How should governance professionals manage greenwashing?
