From 31 May 2024, the FCA anti-greenwashing rule requires every authorised firm to make sure that what it says about the sustainability of its products and services is fair, clear and not misleading, and consistent with what those products actually do. The FCA published its finalised guidance on the anti-greenwashing rule (FG24/3) on 23 April and it comes into force on the same day as the rule. If your factsheets, fund pages or marketing mention sustainability at all, the rule applies to you whether or not you plan to use a sustainability label.
What is the FCA anti-greenwashing rule?
The anti-greenwashing rule is a requirement that any reference to the sustainability characteristics of a product or service is consistent with those characteristics, and is fair, clear and not misleading. It sits in the FCA’s ESG sourcebook at ESG 4.3.1R, and it was finalised in November 2023 as part of the Sustainability Disclosure Requirements (SDR) and investment labels package, PS23/16.
It applies when a firm communicates with clients in the UK about a product or service, or communicates or approves a financial promotion to a person in the UK, which includes promotions a firm approves for unauthorised persons, overseas products among them. Unlike the labels and the naming and marketing rules, it isn’t limited to investment managers, because it applies to all authorised firms.
What does the FG24/3 guidance expect?
FG24/3 sets out four expectations for how the rule should be met, and each one has practical consequences for fund documents. Sustainability references should be:
- Correct and capable of being substantiated: claims should be factually correct, and firms should be able to support them with “robust and credible evidence”, in the FCA’s words, at the time the claim is made. Claims and evidence should be reviewed regularly for as long as they’re live, which matters for a factsheet that’s refreshed every month.
- Clear and presented in a way that can be understood: technical terms may need explaining for the audience, and images, logos and colours count as well, since a claim can be undermined if the words are correct but the visual presentation gives a different impression.
- Complete: claims shouldn’t omit or hide important information and should consider the full life cycle of the product or service, rather than picking out only the favourable parts.
- Fair and meaningful in any comparison: if you compare a product with another product, or with an earlier version of itself, the comparison should be like for like and clear about what’s being compared.
The guidance also includes worked examples. One describes a fund promoted as “fossil fuel free” whose terms allow holdings in companies earning revenue from fossil fuels below a threshold, which makes the claim factually incorrect and therefore misleading. Another describes promotions saying that all investments are reviewed for sustainability characteristics when that isn’t systematically true.
What changed from the consultation?
The FCA consulted on draft guidance (GC23/3) alongside PS23/16, and the consultation closed on 26 January 2024 with 69 responses. The final guidance adds more examples, including social as well as environmental scenarios, and clarifies the scope. Some respondents asked for the guidance to start on 2 December 2024 alongside the naming and marketing rules, but the FCA declined because the rule starts on 31 May and it wants the guidance to apply from the same date.
The FCA also confirms that the guidance is consistent with the Competition and Markets Authority’s guidance on environmental claims and with the Advertising Standards Authority’s approach, and that the rule covers products and services. Claims a firm makes about itself are still caught by the FCA’s Principles, by the Consumer Duty where relevant, and by consumer protection law.
What it means in practice for greenwashing risk
The anti-greenwashing rule applies before the rest of SDR. Investment managers can start using labels from 31 July 2024, and the naming and marketing rules for funds that use sustainability terms without a label start on 2 December 2024, but the anti-greenwashing rule comes first and applies regardless of either.
It also reaches every channel, because factsheets, fund web pages, presentations, social media posts and commentary all carry sustainability claims and all of them need the same discipline.
In practice that means the evidence has to travel with the claim: if a document says a fund excludes certain sectors or invests a certain share in sustainable assets, someone needs to be able to show the data behind that statement for that date, which is far easier when your fund data management gives every channel the same governed source.
The timeline
- 28 November 2023: PS23/16 is published, finalising the rule, and the GC23/3 consultation opens
- 26 January 2024: the consultation on the guidance closes
- 23 April 2024: FG24/3 is published, and the FCA also consults on extending SDR to portfolio management (CP24/8, closing 14 June 2024)
- 31 May 2024: the anti-greenwashing rule and guidance come into force
- 31 July 2024: UK investment managers can start using sustainability labels
- 2 December 2024: the naming and marketing rules come into force
What should investment managers do now?
- Build an inventory of your sustainability claims, listing every reference across factsheets, websites, presentations and social content, fund by fund.
- Link each claim to its evidence by recording the data, policy or holdings analysis that supports it and how often that evidence is refreshed.
- Check the pictures as well as the words, reviewing any images, colours and icons that suggest sustainability to make sure they match what the fund does.
In spirit the rule isn’t new, since fair, clear and not misleading has always been the standard. What it adds is an explicit basis for the FCA to challenge sustainability claims, along with a clear expectation that every claim can be backed up on the day it’s made.
At Kurtosys we help investment managers keep their fund data governed and consistent, so the same approved numbers and statements flow into factsheets, regulatory documents, client reports and fund websites. When sustainability claims are driven from one governed source, it’s far easier to show what was said, where, and on what evidence. If you’d like to talk through what the anti-greenwashing rule means for your documents and channels, get in touch.
Sources: FCA FG24/3: finalised guidance on the anti-greenwashing rule, FG24/3 (PDF), FCA press release, 23 April 2024, FCA PS23/16: Sustainability Disclosure Requirements and investment labels, FCA CP24/8, as at 1 May 2024.
About this article
This article reflects the position at 1 May 2024 and was checked against the primary sources available at that time. Thomas Bjerkén, our regulatory reporting and fund data specialist, joined Kurtosys after it was published and now looks after our regulatory content. The UK SDR regime has moved on since. For the latest position, see SDR naming and marketing rules: one month to the 2 April cut-off.
