Skip to content

FCA confirms anti-greenwashing guidance and proposes extending sustainability framework

As we move into 2024, the raft of sustainability-related regulation continues to increase at pace (alongside the proliferation of acronyms that seem to be a unique feature of the sustainability world). In November 2023, the FCA introduced a long-awaited package of measures, including the Sustainability Disclosure Requirements (“SDR”) and investment labels regime, to improve the trust placed in and transparency of sustainable investment products and to reduce greenwashing.

These include:

  • An anti-greenwashing rule that applies to all FCA-authorised firms that make sustainability-related claims about products and services – this comes into force on 31 May 2024. Firms need to ensure their sustainability references are fair, clear and not misleading and proportionate to the sustainability profile of the product and service.
  • Investment labels, disclosure and naming and marketing rules apply to UK asset managers. Labels can be used from 31 July 2024, with accompanying disclosures. The FCA is introducing four investment labels for products with sustainability objectives that aim to improve or pursue positive outcomes for the environment and/or society – ‘Sustainability Impact’, ‘Sustainability Improvers’, ‘Sustainability Focus’, and ‘Sustainability Mixed Goals’.
  • Targeted rules that apply to distributors of investment products to retail investors in the UK.

The FCA have said that all authorised firms should prepare for the new anti-greenwashing rule if they make claims about the sustainability of their products or services, to ensure claims are fair, clear and not misleading. In a recent development, on the 23rd of April 2024, the FCA issued finalised guidance, in advance of its anti-greenwashing rule to firms on meeting the standard expected.

What are the key points of the guidance?

The new rule is designed to protect consumers by ensuring sustainable products and services they purchase are accurately described. Guidance on this is available here.

1 The anti‑greenwashing rule in the Environmental, Social and Governance (ESG) Sourcebook (ESG 4.3.1R), requires firms to ensure that any reference to the sustainability characteristics of a product or service is consistent with the sustainability characteristics of the product or service, and is fair, clear and not misleading.

The anti‑greenwashing rule applies when a firm communicates with clients in the UK in relation to a product or service or communicates a financial promotion (or approves a financial promotion for communication) to a person in the UK. In practice, the effect of the anti‑greenwashing rule means that the communication must be:

  • Correct and capable of being substantiated
  • Clear and presented in a way that can be understood
  • Complete – it should not omit or hide important information and it should consider the full life cycle of the product or service
  • Comparisons to other products or services are fair and meaningful

Results from the latest Financial Lives survey 2 show that there is significant consumer interest in sustainable finance - 81% of adults surveyed would like their investments to do some good as well as providing a financial return. FCA work in this sector is intended to support the long-term growth and competitiveness of the sector by helping businesses meet this demand and ensuring that consumers who invest in sustainability-related financial products can make informed decisions. See here

The FCA also released Consultation Paper 24/8, on extending to portfolio managers the requirements on how sustainable investments are labelled and explained. The proposed labelling and SDR requirements for portfolio managers largely mirror those introduced for asset managers in November 2023 and they include product labels to help consumers understand what their money is being used for and naming and marketing requirements so that products can be described as having positive outcomes on the environment and/or society only when those claims can be backed up.

The FCA proposes to extend the SDR and investment labels regime to all forms of portfolio management services, including where the portfolio management offering (the agreements or arrangements) are model portfolios, customised portfolios and/or bespoke portfolio management services (tailored to the clients’ needs and preferences). How firms apply them will depend on the nature of their business model.

It is proposed that these labelling and naming and marketing requirements for portfolio managers, and the associated consumer-facing and pre-contractual disclosures, will come into force on 2 December 2024. Firms will need to start producing ongoing product-level disclosures from one year later. Firms with assets under management greater than £50 billion will need to produce entity-level disclosures by 2 December 2025. Firms with AUM greater than £5 billion will need to start producing entity-level disclosures by 2 December 2026.

Key takeaways for Compliance Managers:

  • Consistency across all communications related to sustainability is absolutely key to meeting these requirements when preparing the relevant consumer-facing disclosures and detailed product-level disclosures. Where relevant, your firm’s Stewardship Code statement and TCFD disclosures need to mirror the customer-facing disclosures.
  • Understand whether the business would like to label products or portfolios that aim to achieve positive sustainability outcomes. If so, assessing whether the relevant products meet the qualifying criteria. Assess products and portfolios against the naming and marketing requirements and prepare to make any changes needed.
  • With regards to products such as EU UCITS funds, the Government confirmed in late January that it intends to consult on whether to broaden the scope of SDR to include funds recognised under the OFR – so watch this space, as whilst this would mean the products would be easily comparable for a UK consumer, these products would also carry their Article 6,8 or 9 ‘labels’ under the SFDR – adding to the disclosure requirements for each fund.

How can we help you?

Thistle Initiatives has supported investment firms for over 10 years as a trusted compliance and regulatory adviser. In addition to assisting firms as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your sustainability arrangements, or more general regulatory questions? If so, we can help in any of the following ways;

  • Advising on whether your client communications meet the anti-greenwashing rule
  • Advising on financial promotion approvals
  • Supporting your firm in updating your client and firm sustainability disclosures
  • Advising on how the Consumer Duty affects this area
  • Reviewing and commenting on your compliance monitoring programme

Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to