The Anti-Greenwashing Rule is a core component of the FCA’s Sustainability Disclosure Requirements (SDR) – alongside the new labels and disclosures. The UK’s flagship scheme is set to raise the bar on other ESG regulatory regimes, like Europe’s SFDR, aiming to reinforce trust amongst retail investors by ensuring financial products marketed as sustainable do as they claim and have the evidence to back it up.
It’s landed and it applies to all firms.
Lawyers often say times of regulatory change create opportunity because many of those affected have deferred doing anything until the change actually happens and then they feel the need to catch up. The SDR timeline for implementation is staggered but Advisers should be aware that the Anti-greenwashing rule comes into force this month, on the 31st May. It‘s the FCAs first warning shot to the industry!
The Anti-greenwashing rule applies to all FCA-authorised firms – including Advisers!
| ACTION 1: Read Chapter 4 (Policy Statement PS23/16) |
It’s simple (on paper).
The rule will require Advisers to ensure that any reference to the sustainability characteristics of a product is; a) Consistent with the sustainability characteristics of the product and b) Fair, clear and not misleading.
Any reference or claim of any environmental and/or social elements must be;
- Accurate and capable of being substantiated.
- Clear and presented in a way that can be easily understood by clients.
- Complete – i.e. not hiding any important information or caveats.
- Fair & meaningful in comparison to other products.
| ACTION 2: Review all investment propositions and how they’re presented to clients – are there any references to sustainability or ESG characteristics? |
It applies to ALL content.
Advisers should be aware that this rule applies to all claims, communications and documentation. It even extends to any sustainability-themed imagery. Advisers should be reviewing all of their materials. From policies & strategies to newsletters and websites, Advisers must ensure the claims are accurate and can be backed up under scrutiny. Using ‘green’ imagery or graphics could be a form of inadvertent greenwashing if they do not relate to the product or service.
| ACTION 3: Review all your materials to identify where the areas of risk could arise. |
Help is here.
The FCA has just released accompanying guidance for firms. Advisers should be aware this provides further details and examples which help in interpreting and applying the rule.
Before the 31st May, we recommend Advisers be proactive and conscious of the reputational risk of landing on the regulatory radar by offering products and services that do not live up to what they are claiming.
| ACTION 4: Read the new “Finalised non-handbook guidance on the Anti-Greenwashing Rule” published April 2024 (it’s only 23 pages….) |
If you want to fast-track your knowledge about these and other sustainable investment developments join us at the Impact Investment Academy, at BAFTA, London on the 20th November 2024. Buy your tickets here.