FCA publishes anti-greenwashing guidance and consults on extending SDR

The FCA has finalised its anti-greenwashing guidance and launched a consultation on extending the Sustainability Disclosure Requirements (SDR) and investment label regime to include portfolio management.

The anti-greenwashing guidance aims to assist firms with complying with the anti-greenwashing rule coming into force on 31 May 2024, which requires firms to ensure that any references to the green characteristics of a product or service are not misleading.

Key aspects of the guidance, which provides practical examples, include that any references to sustainability should be:

  • Correct and able to be evidenced.
    • Firms should regularly review their claims and ensure evidence continues to be relevant, updating this if not.
  • Clear and understandable.
    • Firms should tailor their claims to the intended audience to ensure understanding.
    • Firms should include in this a consideration of the visual impressions some claims can make with regards to the green credentials of a product or service.
  • Complete: information should not be omitted and the full life cycle of a product or service should be considered.
    • All claims should be presented in a balanced manner which does not use positive sustainability impacts to obscure negative ones.
  • Any comparisons made to another product or service must be fair and meaningful.
    • Comparisons should be used to provide a more informed choice to the intended audience.
    • Any evidence to substantiate comparisons should include all the products or services compared.

The guidance also summarises the feedback received to its consultation on the topic. Generally, of the 69 respondents from a variety of stakeholders, most supported the guidance and the aim to minimise greenwashing by firms, though some disagreed with the implementation date.

The FCA’s consultation on extending the SDR and labelling package to portfolio management has also been launched with the aim of assisting consumers navigate the sustainable investment market. Feedback to previous consultations showed support for the extension, so the FCA has now refined its proposals.

The FCA proposes a broadly similar approach as it applies to fund managers, which would consist of applying the labelling regime, naming and marketing rules, and disclosure requirements to portfolio managers. The regulator proposes to apply a similar framework as it did for fund managers in order to promote consistency and fairness.

The consultation wants to hear from firms providing portfolio management services and closes on 14 June 2024.

Harry Wells