Richard Andrews, KPMG’s head of ESG for financial services, has recently commented on the UK Financial Conduct Authority’s (FCA) anti-greenwashing rules (AGR), which come into force recently.
Andrews noted:
“While we expect the FCA to take a pragmatic approach and give authorised firms some leeway while they embed the AGR expectations, firms should not underestimate the scale of work required. They will need to be able to demonstrate that they have understood the scope of the requirements and are able to substantiate sustainability-related claims in all their communications relating to financial services and products in the UK. They also need to consider the wider implications of any claims made at firm level and the impacts these could have on the perception of their operations.”
He added:
“Prioritization of the review of existing sustainability-related comms based on a clear set of criteria and consistent guidance will be key. Firms should also focus on developing robust, forward-looking controls to ensure that future comms regarding products and services are aligned to the AGR.”
For additional context and background, it is worth mentioning that ahead of the anti-greenwashing rule coming into force on 31 May, the FCA had noted earlier that it is supporting industry “with guidance to help them meet the standard.”
The new rule is designed to “protect consumers by ensuring sustainable products and services they are sold are accurately described.”
Results from the latest Financial Lives survey show “significant consumer interest in sustainable finance as 81% of adults surveyed would like their investments to do some good as well as provide a financial return.”
This work supports the long-term growth and competitiveness “of the sector by helping businesses meet this demand and ensuring consumers who invest in sustainability-related financial products can make informed decisions.”
The FCA is also consulting “on extending to portfolio managers the requirements on how sustainable investments are labelled and explained, making consumer choice easier.”
These are firms that manage a group of investments for consumers, “which can either be offered as standardised products or tailored services.”
The proposed labelling and Sustainability Disclosure Requirements (SDR) for portfolio managers “largely mirror those introduced for asset managers in November 2023.”
They include:
- product labels to help consumers understand what their money is being used for
- naming and marketing requirements so products can only be described as having positive
- outcomes on the environment and/or society when those claims can be backed up
Sacha Sadan, Director of Environmental, Social and Governance, FCA, said:
“Confirming the new anti-greenwashing guidance and our proposals to extend the Sustainability Disclosure Requirements and investment labels regime are important milestones that maintain the UK’s place at the forefront of sustainable investment. Our good and poor practice anti-greenwashing examples will help firms market their products in the right way. We continue to work closely with the ASA and CMA to address greenwashing. Consumers care about investing in products that have a positive impact on the planet and people. That’s why we want to boost the integrity of the market and ensure people can make informed decisions with their money.”
