FCA Anti-greenwashing rule – what it means in practice

The FCA’s new Sustainability Disclosure Requirements (SDR) include an anti-greenwashing rule which will apply to all FCA authorised firms from 31 May 2024.

As we explained previously, the anti-greenwashing rule covers all communications about financial products or services where they refer to environmental and/or social characteristics. This includes images on your website, content of marketing materials, policies, fund documents, targets and other communications and claims.  

The new FCA rule states:

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

a) consistent with the sustainability characteristics of the product or service; and

b) fair, clear and not misleading.

Who it applies to

This rule applies to a firm (whether it is undertaking sustainability in-scope business or not) which:

(a) communicates with a client in the UK in relation to a product or service; or

(b) communicates a financial promotion to, or approves a financial promotion for communication to, a person in the UK.

Unlike the other SDRs, the anti-greenwashing rule is not limited to communications with retail clients – it captures professional and business-to-business communications for all FCA-regulated firms. This includes Alternative Investment Fund Managers (AIFMs), and even UK managers of non-UK funds, including those marketing in the UK but managed by a non-UK affiliate. Communications in response to a reverse enquiry from a UK investor are also in-scope. The rule applies only to communications to persons in the UK / UK clients.

What is means for AIFMs in practice and how to get ready

Under the SDR, sustainability references must meet the “four Cs”: Correct, Clear, Complete, and Comparisons must be fair and meaningful.

1. As a first step review all your marketing materials, websites, presentations, one-pagers, DDQs etc. – including the imagery you use on your website or reporting – to ensure it meets the criteria – see here for more guidance and examples of what might be considered greenwashing.

2. Make necessary updates to ensure communications are in line with anti-greenwashing guidance.

3. Ensure teams are trained on the new rules (in particular those creating marketing materials and developing messaging for UK clients).

If SFDR-compliant documents are distributed in the UK, they will also need to be reviewed against the anti-greenwashing rule.

Do get in touch if you have any questions or would like any assistance in the implementation of the FCA’s SDRs.