UK firms told to ‘urgently review’ green claims

Keeping watch: A file photo of the FCA’s head office in London. The authority says it plans to enforce broad consumer protections against misleading green claims. — Reuters

London: Firms operating in Britain are being advised to go through any products and services around which some sort of sustainability claim has been made, to ensure they’re not in the crosshairs of a regulatory crackdown that’s due to take effect at the end of next month.

The Financial Conduct Authority’s (FCA) plan to move ahead with anti-greenwashing rules has far-reaching implications for British businesses, and leaves them with only limited time to shield themselves from potential regulatory action, according to industry associations and consultants advising businesses.

“The rule will impact all products and services with sustainable features, not just those with a green/sustainable label, which means firms have a large review task to complete now within a short time period,” Richard Monks, sustainable finance partner at EY, said in an emailed statement.

“Firms need to urgently review all products and services that are in scope, assessing their risk exposures and creating a clear strategy to reduce their greenwashing risk.”

The comments follow an update by the FCA, which confirmed it will stick with a May 31 enforcement date for its anti-greenwashing rule, despite considerable pushback from the country’s businesses.

The regulation affects all FCA-authorised firms, with a view to enforcing broad consumer protections against misleading green claims, it said.

Oscar Warwick Thompson, head of policy and regulatory affairs at the UK Sustainable Investment and Finance Association, said the group welcomes the FCA’s “efforts to address greenwashing risks”.

He also noted that “the turnaround for implementation is very tight, and we will continue to work with our members to help them get to grips with this guidance and the rule”.

The announcement was bundled with the launch of a consultation into expanding the scope of the FCA’s environmental, social and governance (ESG) investing rulebook, the Sustainability Disclosure Requirements (SDR), which gives market participants until June 14 to respond.

The watchdog wants SDR to apply not just to fund managers but to all forms of portfolio investing including private markets.

The SDR plan envisages dividing funds with ESG goals into four labelled categories, spanning impact to transition strategies. The FCA plans to start enforcing its expanded SDR rules on Dec 2, pending consultation feedback.

Firms will need to start producing ongoing product-level disclosures from one year later, with specific requirements depending on their size.

“The FCA hopes these measures will support Britain’s position as a world-leading, competitive centre for asset management and sustainable investment,” it said.

“It will also protect consumers by helping them to make more informed decisions when investing and enhance the credibility of the sustainable investment market.” — Bloomberg

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