Changes in Anti-Greenwashing Regulations: Business Implications

In recent years, there has been a growing concern about greenwashing – the deceptive practice of presenting a company's products, activities, or policies as environmentally friendly when they are not. To address this issue, regulatory bodies have been planning to introduce measures to improve trust and transparency in sustainable investment products and reduce greenwashing.

In the UK, the Financial Conduct Authority (FCA) will be implementing a new sustainability disclosure and labelling regime, which will have significant implications for businesses, particularly FCA-authorised firms, UK asset managers, and distributors of investment products to retail investors.

Key Changes in the Anti-Greenwashing Regulations

The sustainability disclosure and labelling regime which will be introduced by the FCA includes several key changes that businesses need to be aware of:

Who is Affected by the Regulations?

• An anti-greenwashing rule applies to all FCA-authorised firms making sustainability-related claims about their products and services.
• UK asset managers are subject to investment labels, disclosure, and naming and marketing rules.
• Distributors of investment products to retail investors in the UK are also subject to targeted rules.

Actions for FCA-Authorised Firms

• Prepare for the new anti-greenwashing rules to ensure that their sustainability claims are fair, clear, and not misleading.
• Follow and read up on further guidance to the anti-greenwashing rules.

Actions for UK Asset Managers

• Familiarise themselves with the regime and take steps ahead of the rules coming into effect.
• Ensure they are aware of the relevant requirements as well as the implementation timelines.

This includes:

• Assess their products against naming and marketing requirements and prepare to make any necessary changes.
• Prepare relevant consumer-facing disclosures, detailed product-level disclosures, and other statements where relevant.

Associated actions to be carried out:

• Following the standard fund authorisations and amendments process. The FCA will not be approving the use of labels.
• Notifying the FCA of label usage via a form on our online notification and applications system.
• Preparing for continuous actions including annual reviews, updating pertinent disclosures, and the necessary steps when altering a label.

Actions for all Distributors

• Make labels and consumer-facing disclosures available to retail investors as soon as reasonably practicable and keep them up to date following changes made by the firm.
• If applicable, be ready to include a notification on international funds to advise consumers that they are not bound by the regulations.

Implementation Timelines

The rules and guidance come into force on the 31^st of May 2024, followed by a series of deadlines for compliance with the new requirements. Businesses need to adhere to the implementation timeframes specified by the FCA to ensure compliance with the new regulations.

Source: FCA Sustainability Disclosure and Labelling Regime

Key date takeaways

Anti-greenwashing rule – From 31^st May 2024, companies must ensure that their sustainability claims are accurate, transparent, and proportionate to the product and service's sustainability profile. However, firms under the naming and marketing rules for asset managers have until 2 December 2024 to fulfill these additional requirements.

Labels – From 31^st May 2024, companies have the option to commence using a label. It's important to note that while there is no specific deadline for implementing labels, firms must ensure compliance with the naming and marketing requirements for products utilizing sustainability-related terms without labels by 2 December 2024.

Naming and Marketing - Companies are required to implement the essential alterations to adhere to the naming and marketing requirements by 2 December 2024. If companies are introducing new products before this date, they should remain aware of and take into account these requirements.

Implications for Businesses

The changes in anti-greenwashing regulations have significant implications for businesses, and it is essential for firms to understand how these regulations will affect them and take necessary steps to comply with the new requirements.

Enforcement and consequences – Failure to comply with the new rules could result in potential enforcement action, including suspension from undertaking regulated activities and/or financial penalties.

International considerations – Companies should prepare to add a notice on overseas funds to inform consumers that they are not subject to the regime.

Bottom Line

The changes in anti-greenwashing regulations introduced by the FCA are aimed at enhancing trust and transparency in sustainable investment products and reducing deceptive marketing practices. Businesses, especially FCA-authorised firms, UK asset managers, and distributors, must carefully consider the implications of these changes and take proactive steps to ensure compliance with the new requirements within the specified timeframes.

In summary, the regulations signify a pivotal shift towards greater accountability and transparency in sustainability claims, ultimately benefiting consumers and fostering a more sustainable and responsible business environment.

For more detailed information on the specific requirements and new releases of information, please visit: The FCA site