Complying with the Anti-Greenwashing Rule by May 2024
In late 2023 the FCA confirmed a substantial package of measures to improve the trust and transparency of sustainable investment products and minimise greenwashing. This new regime includes an anti-greenwashing rule (applicable to all FCA Regulated firms), a product labels regime and fund naming requirements (both applicable to UK funds only). Please see our previous note from January that discusses the new regime in its entirety.
This note focuses only on the anti-greenwashing rule because it applies to all UK regulated firms and is the first part of the regime to become effective, in May of this year. By way of reminder the rule will require all FCA-authorised firms to make sure that sustainability related claims made about financial products or services are clear, fair, and not misleading.
What does that actually mean?
In short if communications include references to environmental or social characteristics such as climate, governance, ESG, sustainable, etc. then such references will need to be reviewed to confirm that they are clear, fair and not misleading. In essence this means that any such claims must be:
– Correct and capable of being substantiated;
– Clear and presented in a way that can be understood;
– Complete and not omit//hide information; and
– Fair in relation to any comparisons used.
Examples that would fall short of this standard include:
– Claims as to signatory status to ESG related standards that have not yet been validated;
– Claiming funds are ESG measured with no discernible benchmark against which objective
measurement can be evidenced; and
– Claiming that an investment in a fund will contribute to reducing emissions, without making clear that this only refers to Scope 1 emissions, as opposed to all emissions.
Communications to review and confirm as compliant would include, but not be limited to, newsletters, websites, fund documents and company / fund slide decks.
What should I be doing?
In addition to highlighting the new rule to those responsible for drafting marketing documents, the critical step is to review all existing material that will continue to be used from May onwards and make necessary amendments.
Judd has been appointed to undertake the heavy lifting that such review efforts can involve for some clients. The scope of such projects typically include Judd:
– Reviewing material for sustainability claims;
– Completing an auditable sign off sheet for all relevant material, to demonstrate that a thorough review has been completed;
– Drafting suggested amendments as required, to comply with the new anti-greenwashing rule; and
– Providing training to staff so that future material is drafted in line with the new rule.
If you need any further information on the anti-greenwashing rule or on how Judd can help you demonstrate compliance, please contact one of your Judd team or e-mail info@juddadvisory.com.
