A new rule intended to prevent greenwashing has now come into force. The anti-greenwashing rule was announced by the Financial Conduct Authority (FCA) last year and came into force on 31 May 2024. The anti-greenwashing rule is the first in a series of measures announced by the FCA to formalise sustainability disclosure requirements in the UK. The rule applies to FCA authorised firms which provide financial products and services in the UK.

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.

The anti-greenwashing rule was established after concerns that companies were making false sustainability related claims about financial products that they were offering. The anti-greenwashing rule is intended to both protect the consumer and the integrity of the financial sector as a whole. The rule requires that any company making a sustainability related claim about a financial product ensures that such claims are fair, clear and not misleading.

Under the new rule any sustainability related claims that an FCA authorised company makes about a financial product or service must be:

• correct and capable of being substantiated
• clear and presented in a way that can be understood
• complete – the organisation should not omit or hide important information and should consider the full life cycle of the product or service.

The anti-greenwashing rule also requires that comparisons to other products or services are fair and meaningful.

Interestingly, the anti-greenwashing rule also applies to misleading colours and imagery. The FCA has noted that firms should consider how images, logos and colours together “may be perceived by the audience when presented alongside other sustainability characteristics of a product or service”. The FCA is concerned that organisations were using ESG (environmental, social and governance) as a marketing tool placing green trees and blue skies all over their brochures advertising sustainability related products and giving a misleading impression.

While the anti-greenwashing rule only applies to FCA authorised companies at present, it is likely to have a knock on effect on, for example, organisations seeking to borrow sustainability linked funding as funders will be very concerned about falling foul of these new rules. This means that the level of ESG related science based data organisations will have to provide in order to acquire green, social or sustainable funding is likely to significantly increase. Organisations will also have to be careful with their marketing to ensure that is compliant with the rules on misleading colours, logos and imagery.

How Capsticks can help

Capsticks are ESG and green, social and sustainable finance specialists. Whether you’re an ESG expert or starting your sustainability journey, we can help. We can advise on green and social loans or bonds, green private placements and sustainability linked loans. We can provide bespoke training on various aspects of ESG. We can also assist you with putting in place a sustainability strategy or a sustainable framework, drafting ESG policies and advising on net zero transition plans and ESG/impact reporting. 

To discuss ESG or green, social and sustainable finance please contact Naomi Roper.