How do you comply with the FCA’s new anti-greenwashing rule?, Wendy Saunders

On 23 April 2024 the FCA published its finalised non-handbook guidance on the anti-greenwashing rule, which both come into force on 31 May 2024.

Aims

The outcomes that the FCA is aiming to achieve through the rule and guidance include:

Protection of consumers from greenwashing;
Creation of a level playing field for firms in an evolving market; and
Increase in trust in sustainability-related claims resulting in more capital flowing into these products.

Any reference to the sustainability characteristics of a product or service must be consistent with the actual sustainability characteristics of the product or service and must be clear, fair and not misleading.

Scope

The rule applies to:

Financial promotions and client communications
Sustainability characteristics including environmental and social characteristics
Financial products and services which FCA-authorised firms make available for clients in the UK
Is in addition to other clear, fair and not misleading rules in the FCA Handbook as well as other legislation and guidance e.g. consumer protection law, CMA and ASA guidance.

Assessment criteria for sustainability references

Sustainability references should be:

Correct and capable of being substantiated	Claims should not be overstated or exaggerated Claims should not provide conflicting or contradictory information Products should do what they say they do Supporting evidence must be valid for as long as the claims are being communicated Firms may want to make supporting evidence publicly available in an easily accessible way
Clear and presented in a way that can be understood	Technical terms may need to be explained for the intended audience Use of broad terms or general statements may be unclear and confusing Firms should be aware of the impression created by the overall presentation of a claim – including images, logos and colours
Complete – they should not omit or hide important information and should consider the full life cycle of the product or service	Claim should give a representative picture of the product or service Where claims are subject to conditions and limitations, these should be clearly and prominently disclosed Claims must be presented in a balanced way, not focussing solely on the positive sustainability characteristics when other aspects may have a negative impact on sustainability Claims should be based on the full lifecycle of a product or service, or state which part of the lifecycle the sustainability characteristic relates to but firms should not cherry-pick information to give the impression a product or service has sustainability characteristics that it does not have.
Comparisons to other products or services are fair and meaningful	Comparisons should compare like with like, make clear what is being compared, explain how a comparison is being made Market-wide comparisons should not be based on a limited sample Claims should not wrongly give the impression that a product or service is superior to others available Substantiating evidence for comparative claims should cover all products or services compared.

Next steps

Firms should review their marketing and client communications for compliance with these regulatory expectations in anticipation of the greenwashing rule and guidance coming into force. The guidance raises difficult points of application in practice and we would be pleased to advise on any queries you may have.