The UK Financial Conduct Authority’s (FCA) anti-greenwashing rule (AGR) came into effect on 31 May 2024 and applies to all FCA-authorised firms.
Greenwashing involves making false or misleading claims about the environmentally friendliness of a product or a service, often seen in sectors such as energy, transport & automative and fashion. For instance, the Competition and Markets Authority is investigating ASOS, Boohoo and Asda for potentially untruthful ‘eco’ or ‘sustainable’ statements.
Background
In November 2023, the FCA published the Policy Statement on Sustainability Disclosure Requirements and investment labels (the Policy Statement) including a general AGR. The AGR was added to the Environmental, Social and Governance (ESG) Sourcebook (ESG 4.3.1R), which came into effect on 31 May 2024.
Following a consultation, the FCA also released non-handbook guidance in April 2024 (Guidance) (effective from 31 May 2024). The Guidance assists firms in understanding the AGR, by clarifying its stipulations and link to the FCA’s overall objectives.
Scope of the AGR
The AGR applies to all FCA-authorised firms who are :
- communicating a financial promotion (for a domestic or overseas financial product or service) to a person in the UK; or
- communicating with clients in the UK in relation to a product or service; or
- approving financial promotions (for a domestic or overseas financial product or service) for communication to a person in the UK.
Where a reference to sustainability characteristics (environmental and/or social) of that financial product or service is made, the firm must ensure that the content is:
- consistent with actual sustainability characteristics of that financial product or service; and
- fair, clear and not misleading.
A reference to sustainability characteristics (Reference) can be made in information, statements, policies, targets, assertions, strategies and images.
The Guidance
The Guidance provides helpful explanation on the FCA’s expectations with the introduction of the AGR (and descriptive examples). The key principles surrounding References are:
- Correct and capable of being substantiated – This means that firms must be able to demonstrate suitable supporting evidence in respect of their References. This ongoing requirement will require regular reviews to ensure that sustainability claims continue to be capable of being evidenced.
- Clear and can be understood – Claims made by firms must be transparent so that their meaning would be understood by the target audience. For References made by colours, logos or imagery, thought must be given to how the combination of the materials would be interpreted by a customer or client.
- Complete – Important information in the Reference must not be concealed or omitted. Claims should be unbiased and highlight both positive and negative sustainability characteristics. The overall and full life cycle of the product or service should be considered, and any claims should be fair as to sustainability characteristics during this timeframe.
- Comparisons are fair and meaningful – Where a Reference compares the sustainability characteristics of multiple products and services, the object and method of the comparison should be clear. A comparison should be made on a like for like basis.
Considerations for you
FCA-authorised firms must take proactive steps to ensure that any communication that contains any References about the sustainability of their products or services must be overall fair, clear and not misleading.
If you require any further information, please do not hesitate to contact Mark Archer at marcher@maddoxlegal.co.uk