FCA Steps Up Its ESG Focus With Introduction Of Anti-greenwashing Rule

Various sections of the FCA Handbook already require most firms to ensure the information they communicate is fair, clear and not misleading.
UK Environment
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The Advertising Standards Agency (ASA) and latterly the Competition and Markets Authority (CMA) have been leading the UK regulatory charge with respect to policing claims relating to the sustainability characteristics of products and services. However, the Financial Conduct Authority (FCA) now appears to be picking up the baton.

What is the anti-greenwashing rule?

The FCA has introduced a new anti-greenwashing rule (AGR) and finalised guidance to protect customers from misleading sustainability claims. The AGR, which came into force in May 2024, requires firms to ensure that any references to the sustainability characteristics of a product or service are fair, clear and not misleading. In summary, the references must be consistent with the sustainability characteristics of the product or service itself.

The FCA announced the AGR in November 2023 as part of a larger package of measures on sustainability disclosure requirements and investment labels. The AGR and accompanying guidance are consistent with the CMA guidance on environmental claims and the requirements of the ASA guidance on misleading claims and social responsibility in advertising.

Why is the AGR being introduced?

Various sections of the FCA Handbook already require most firms to ensure the information they communicate is fair, clear and not misleading. This includes the FCA's Principles of Business (PRIN), which apply in full or in part to most firms, the FCA's Conduct of Business Sourcebook (COBS), which explains what 'fair, clear and not misleading' means in relation to financial promotions for investments and the Consumer Credit Sourcebook 3.3, which provides further context for consumer credit. So why has the FCA introduced this new AGR?

In its guidance, the FCA explains that tackling greenwashing is a priority, and that it has therefore introduced the AGR to clarify to firms that sustainability‑related claims about their products and services must be fair, clear and not misleading. The FCA has also introduced the AGR to ensure that when it wants to challenge firms and, if appropriate, take further action in relation to any misleading sustainability-related claims about their products or services, it can do so on the basis of an explicit rule.

Who does it apply to?

In summary, the AGR applies to all FCA-authorised firms that communicate:

– with clients in the UK in relation to a product or service, or
– a financial promotion (or approve a financial promotion for communication) to a person in the UK1.

The rule also has an element of extraterritorial reach: it applies to financial promotions that authorised firms communicate or approve for unauthorised persons, including for overseas products and services, provided the promotion is approved in the UK2.

What does this mean for FCA-authorised firms?

The guidance sets out that the effect of the AGR is that firms' sustainability references should be:

Correct and capable of being substantiated

In short, this means that any claims should be factually correct, and the firm should not imply or exaggerate a product or service's sustainability or positive environmental impact. The FCA has clarified that claims can be misleading if they provide conflicting or contradictory information. It is not sufficient for firms to ensure compliance of a communication with the AGR only when it is initially made. Instead, they are subject to an ongoing duty to review their claims and any supporting evidence to ensure the evidence is relevant as long as the claim is being communicated.

Clear and presented in a way that can be understood

Firms should ensure that the meaning of all terms can be understood by the intended audience. Any technical language should be defined and explained for the intended audience where the meaning may be unclear or difficult to understand. Broad and general statements should be avoided.

The FCA has rightfully drawn a distinction between claims communicated to a retail client as opposed to a professional client; for the latter, firms may not need to include the same level of detail or present their claims in the way they would be presented to a retail client.

The FCA also draws attention to aspects like colours, logos and images that can be an important part of the overall presentation of a claim and advises firms to consider how these elements, taken together, may be perceived by an audience when presented with other sustainability characteristics of a product or service.


Important information should not be hidden or omitted, and firms should consider the full lifecycle of the product or service. Where claims are true only if specific conditions apply, these should be clearly stated. Any limitations of information, data or metrics used in a claim should be clearly and prominently disclosed. It is also important for firms to ensure that claims are presented in a balanced way, such that the positive sustainability impacts of a product or service are not highlighted in a way that disguises any potential negative impacts on sustainability.

The guidance also urges firms to consider the lifecycle of a product or service when making sustainability-related claims and ensure that they base their claims on the full lifecycle of the product or service.

Firms should also consider whether information about the firm itself may be considered part of the representative picture of a product or service; if so, firms should ensure that those claims meet the relevant rules and expectations so that the overall perception is fair, clear and not misleading.

Any comparisons to other products are fair and meaningful

Any claims a firm makes when comparing a product or service to one of their previous versions or to that of a competitor should enable the audience to make informed choices about the products or services.

Any claims comparing products or services should make it clear what is being compared, and how the comparison is being made. Claims that make market-wide comparisons that are based on a limited sample have the potential to mislead their audience.

What will potential FCA enforcement action look like?

The FCA will take its usual supervisory and enforcement approaches in relation to any breach or potential breaches of the AGR.

What should firms do now?

The guidance is prescriptive and outlines a range of factors that firms should consider when making any claims about the sustainability of their products or services and/or in relation to financial promotions. Crucially, firms need to consider how different aspects of their claims, taken together, could be interpreted.

While firms should already be ensuring that their claims are 'fair, clear and not misleading' under existing FCA requirements, the introduction of the AGR and accompanying guidance ought to prompt firms to review and reconsider any existing sustainability claims in relation to their products or services.

1 ESG 4.3.1R
2 FG24/3: Finalised non handbook guidance on the Anti Greenwashing Rule (fca.org.uk) paragraph 2.5

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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