The Financial Conduct Authority’s (FCA’s) anti-greenwashing rules, which come into force today (31 May), will “elevate” the credibility of sustainability information in the market and could direct more investment into carbon credits, experts have said.
In 2022, the FCA launched a consultation on new measures aiming to protect consumers and investors from “misleading” sustainability-related claims, with the regulator publishing the finalised guidance on the rules last month.
Overall, investors and experts in the sustainability sector have reacted positively to the anti-greenwashing rules, commenting that this is a significant advancement in regulatory oversight.
Alex Godfrey, investment director at Octopus Investments, highlighted that the FCA’s greenwashing guidelines add the “much-needed guard rails around sustainable investing”, complimenting other voluntary frameworks such as the Science Based Targets Initiative (SBTI) and the Integrity Council for Voluntary Carbon Markets (ICVCM).
Octopus believes that carbon credits make up a "vital part" of the net zero transition, with the manager committed to investing in degraded land to rebuild its natural stores, sustainable farming and ecotourism, Godfrey said.
“Now that we have both types of frameworks in place, we should see the natural capital mature and scale as both a viable climate mitigation solution and asset class,” he added.
Cadi Thomas, investment consultant at Isio, was also positive about the new guidance, suggesting that they “promise a substantial impact”.
“By ensuring that both firms' own products and services, as well as those of third-party providers, are free from false or unsupported claims, these rules aim to elevate the integrity of sustainability information in the market,” he said.
However, despite these positives, Thomas noted that the “wide-reaching approach” of the rules does highlight “ambiguities”, particularly regarding the required level of due diligence on third-party information and the management of past communications.
Paul Hamalainen, Mazars’ global sustainable finance and UK prudential policies director, stated that the FCA’s guidance on the rules prevents the “risk” of firms delaying progress on sustainability.
“The four expectations are guiding lights to help firms stay within the rules. Now it is down to companies to undertake a drains-up assessment of their sustainability practices and promises to ensure they are operating in accordance with the guidelines and the requirements for public disclosure,” Hamalainen said.
Campaigners pointed out that this was now a new opportunity to hold financial organisations accountable. Make My Money Matter, a campaign to hold pensions providers in the UK accountable on climate promises has today released a letter to the Financial Conduct Authority (FCA), the Competition Markets Authority (CMA) and the Advertising Standards Authority (ASA) urging regulators to investigate some of the UK's largest high-street lenders, Barclays, HSBC, Santander, Natwest and Lloyds for greenwashing.
