The FCA's finalised guidance on the Anti-Greenwashing Rule 

June, 2024 - Shoosmiths LLP

In April 2024, the FCA issued practical steps and finalised guidance on the Anti-Greenwashing rule, effective from 31 May 2024, ushering forth the FCA's regulatory priority accorded to ESG and sustainability.

On 28 November 2023, the UK Financial Conduct Authority (“FCA”) published consultation paper, GC23/3, (the “CP”) outlining its proposed guidance on the Anti-Greenwashing rule (ESG 4.3.1R, the “Rule”).  Underscoring the “regulatory priority” accorded to tackling greenwashing, the CP was aimed at all FCA-authorised firms spanning banks, asset management firms, and investments firms; and sought to distill the practice of greenwashing, offering practical steps and guidance to “help ensure that sustainability-related claims made by authorised firms about their products and services are fair, clear and not misleading, and are consistent with the sustainability characteristics of the product or service”, ushering forth the FCA’s strategy on Environmental, Social and Governance (“ESG”) considerations.

In April 2024, the FCA built upon the CP feedback and issued practical steps and finalised guidance (the “Finalised Guidance”) on the Rule (effective from 31 May 2024), seeking to “protect consumers against greenwashing so they can make informed decisions that are aligned with their sustainability preferences” and to help them better understand which firms and investment products are aligned with the transition to a more sustainable economy.

Under the Finalised Guidance, the FCA confirms that the Rule “gives us an explicit rule on which to challenge firms if we consider they are making misleading sustainability related claims about their products or services and, if appropriate, take further action.” It is therefore imperative for all FCA-authorised firms to familarise themselves with the Rule and to take appropriate steps to understand how they can more accurately market any products or services as “green” or “sustainable”, so as to not fall foul of the Rule.

What is the Anti-Greenwashing Rule?

Incorporating the Rule (ESG 4.3.1R) into both the Handbook and the ESG Sourcebook, the FCA notes that this is “one part of a package of measures we are introducing through our Sustainability Disclosure Requirements and investment labels regime PS23/16”.

1. The Rule applies to a firm (whether it is undertaking sustainability in-scope business or not), which:

  • Communicates with a client in the United Kingdom in relation to a product or service; or
  • Communicates a financial promotion to, or approves a financial promotion for communication to, a person in the United Kingdom.

2. A firm must ensure that any reference to the sustainability characteristics of the product or service is:

  • Consistent with the sustainability characteristics of the product or services; and
  • Fair, clear and not misleading (in line with Principle 7).

Effective from 31 May 2024, the Rule catches: (1) all communications that mention sustainability-linked characteristics relative to products and/or services made or offered by FCA-authorised firms; and (2) financial promotions approved by firms for unauthorised persons for communication in the United Kingdom, and irrespective of whether they are subject to the Consumer Duty.

Key themes

The proposed guidance to the Rule encompasses four main themes honing in on sustainability-related references. In particular, all sustainability-linked references to products and/or services must be:

  1. factually correct and capable of being substantiated, with robust, relevant, and credible evidence;
  2. clear and presented in a way that can be understood by way of terms that are easily understandable by the intended audience, with an explanation of any technical terms used;
  3. complete and not omit, or hide, important information, with a consideration of the full lifecycle of the products and/or services; and
  4. fair and meaningful in relation to any comparisons to other products and/or services, and be capable of being supported with evidence.

In developing its proposed guidance to the Rule, the FCA has worked closely with the Competition and Markets Authority (“CMA”) and Advertising Standards Authority (“ASA”) to ensure consistency and coherence with their respective guidance and regulatory requirements.

Practical steps

Whilst FCA-authorised firms are already subject to rules on the marketing and communications of their products and services, the Rule formalises sustainability-related expectations and is likely to require significant uplift across business areas, processes, and controls. They may therefore want to re-familiarise themselves with the existing FCA Handbook—specifically the Principles for Businesses—which requires most firms to ensure that the information they communicate is fair, clear, and not misleading. In particular, FCA-authorised firms should ready themselves to disclose accurately against the Rule, by taking stock of products and/or services and assessing whether current marketing and/or financial promotions cohere with the Rule.

While the scope of the Rule relates to products and services, the FCA reminds firms that the CMA’s and ASA’s guidance and FCA Principles 6 and 7 or, as relevant, the Consumer Duty (Principle 12 and the rules in PRIN 2A), apply to sustainability-related claims that a firm may make about itself as a firm.

In line with the key themes of the CP, focusing on the Consumer Duty and ensuring that consumers/investors are equipped to make more informed decisions, the FCA is also consulting on extending the disclosure requirements stipulated under the Rule to portfolio managers. The goal is to garner thoughts as to how, as a financial services regulator, the FCA could build upon, and introduce, more robust sustainability-orientated practices for the sector as whole, and to eliminate greenwashing practices.


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