The anti-greenwashing rule is one part of a package of measures the FCA is introducing through the Sustainability Disclosure Requirements (SDR) and investment labels regime PS23/16 (see Sustainability disclosure and labelling regime announced by FCA).

The guidance is intended to support the implementation of the rule and support the FCA’s ESG strategy by improving trust, credibility and integrity in the sustainable finance market. It also contributes towards the Government’s ambitions for the provision of sustainable finance and commitment to a net zero economy by 2050.

Who this applies to

This guidance will apply to all FCA-authorized firms who make sustainability-related claims about their products and services. It includes firms that approve financial promotions for unauthorized persons, for communication in the UK.

It will also be of interest to all of the financial services sector and other interested stakeholders, including:

• industry groups and trade bodies;
• consumer groups and consumers;
• policymakers and other regulatory bodies;
• industry experts and commentators;
• academics and think tanks; and
• stakeholder advocacy groups.

What is in the guidance

The guidance is designed to help firms that make sustainability claims about products and services better understand the FCA’s expectations under the anti-greenwashing rule and other existing, associated requirements.

Fair, clear and not misleading

The FCA’s anti-greenwashing rule, in the Environmental, Social and Governance sourcebook (ESG) 4.3.1R, requires FCA-authorized firms to ensure that any reference they make to the sustainability characteristics of their financial products and services are consistent with the sustainability characteristics of the product or service and are fair, clear and not misleading. Firms should note the Principles for Businesses (PRIN) will also apply

Communications

The rule applies to all communications about financial products or services which refer to the environmental and/or social (for example, sustainability) characteristics of those products or services. Sustainability-related references can be present in, but are not limited to, statements, assertions, strategies, targets, policies, information, and images.

The Consumer Duty also includes certain requirements regarding how firms communicate with retail customers. The FCA asks firms to consider this proposed guidance alongside their obligations under the Duty, where applicable, to help them deliver good outcomes for retail customers.

Firms also need to consider the Competition and Market Authority’s (CMA) guidance on environmental claims is designed to help firms understand and comply with their existing obligations under consumer protection law. The CMA also shares certain consumer protection functions with the Advertising Standards Authority (ASA), the UK’s independent advertizing regulator. The ASA’s guidance is designed to help firms interpret the CAP and BCAP rules regarding environment-related advertizing issues.

Sustainability-related claims

A sustainability-related claim may be any claim which includes references relating to the  sustainability characteristics of a product or service. So, it could be a claim that a mortgage or savings account is “green” or that an investment or pension fund is “sustainable” and aims to deliver positive outcomes for people or the planet. It could also include, but is not limited to, claims relating to the environment, climate or climate change, biodiversity and nature, social issues, or corporate social responsibility.

In the financial services sector, the terms “environmental”, “social” and “governance” are commonly used to classify sustainability issues. However, the FCA does not recognize a single definition of “sustainability”. In PS23/16 “governance” is considered to be an enabler of environmental or social outcomes, rather than an end in itself, and “sustainability characteristics” are referred to as “environmental or social characteristics”.

In practice, the effect of the anti-greenwashing rule means that firms should ensure their sustainability-related claims are:

• Correct and capable of being substantiated: Approvers of financial promotions should take reasonable steps to periodically monitor the continuing ongoing compliance of the financial promotion with the anti-greenwashing rule, and all other financial promotions rules that apply over the lifetime of the promotion, not just on approval.
• Clear and presented in a way that can be understood: Technical language may be difficult to understand, so any technical terms should be explained unless their meaning is clear and widely understood. Firms should consider whether the information they are providing is useful; vague, broad, or general terms may be also unclear and confusing.
• Complete: They should not omit or hide important information and should consider the full life cycle of the product or service. Where claims are only true if certain conditions or caveats apply, those conditions or caveats should be clearly and prominently stated. Similarly, the limitations of any information, data or metrics used in a claim should be clearly and prominently disclosed.
• Fair and meaningful: This is defined as in relation to any comparisons to other products or services claims. Comparing the sustainability characteristics of products and services should make clear what is being compared, how a comparison is being made, and should compare like with like. Claims that appear to make market-wide comparisons but are based only on a limited sample have the potential to mislead their audience.

What happens next

Interested parties should provide their views by January 26, 2024.

The FCA encourages firms to share comments using the form on the website or alternatively email your response to gc23-3@fca.org.uk.

The FCA will review all responses to this consultation and, subject to responses received, intend to publish the finalized guidance. It is proposed that the guidance comes into force on May 31, 2024 at the same time as the anti-greenwashing rule.