Last year, in an attempt to curtail greenwashing in the financial sector, the UK’s Financial Conduct Authority (FCA) issued an anti-greenwashing rule through the Policy Statement on Sustainability Disclosure Requirements and Investment Labels. With the implementation of the rule right around the corner (May 31, 2024), the FCA now releases more guidance on the rule and how financial services companies will be expected to comply with it. PA Future discusses this guidance stating:
“When referencing ‘sustainability’, firms should ensure the following
- It is correct and capable of being substantiated.
- Clear and presented in a way that can be understood.
- It is complete and should not omit or hide information.
- It should consider the full life cycle of the product or service.
- Comparisons to other product services are fair and meaningful.
In particular, the guidance said firms should not ‘overstate or exaggerate a product or service’s sustainability or positive environmental and/or social impact’. It also urged firms to ‘regularly review their claims and ensure they are lived up to.'”
It is worth noting that – although this guidance is specifically intended for the financial sector – many of the principles reflected in the document are appropriate for any company making public statements (formal, informal and on product packaging/labels) about company or product sustainability.
The rule and guidance are part of the FCA’s recent attempts to address problems in sustainable finance. While companies are glad to have new guidance, the article notes many are rushing to comply as the FCA declined to extend the May 31 deadline. Regulators struggle on a global level to reign in greenwashing in finance without constraining markets. In the EU, sustainable finance is addressed through the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy, but these policies have been flawed. The UK’s attempt at anti-greenwashing rules will be watched closely by other regulators looking to address these issues, and if successful, we may see similar mandates arise in other jurisdictions.
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