A&O Shearman | FinReg | UK Financial Conduct Authority Publishes Guidance on Anti-Greenwashing Rule
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  • UK Financial Conduct Authority Publishes Guidance on Anti-Greenwashing Rule

    On April 23, 2024, the U.K. Financial Conduct Authority published guidance on its anti-greenwashing rule, which was introduced into the FCA Handbook's Environmental, Social and Governance Sourcebook as part of the FCA's sustainability disclosure and labeling regime in November 2023. The rule requires authorized firms to ensure that references to the sustainability characteristics of products or services which they market to those in the U.K. are fair, clear and not misleading and are consistent with the sustainability characteristics of the product or service in question. The rule is intended to complement and be consistent with existing fair, clear and not misleading requirements found elsewhere in the FCA's rules (e.g., the Principles for Business and Conduct of Business Sourcebook).

    The FCA's guidance sets out the regulator's expectations of firms subject to the rule. It provides that sustainability references should: (i) be correct and capable of being substantiated; (ii) be clear and presented in a way that can be understood; (iii) be complete (with no omission of important information); and (iv) make fair and meaningful comparisons with other products and services. Firms subject to the Consumer Duty should test whether their communications are likely to be understood by customers and should ensure they can understand and monitor customer outcomes and take proactive steps to investigate and correct any problems they identify. The completeness requirement means firms must make clear where aspects of a product or service could have a negative impact on sustainability. A firm issuing green bonds, for example, should be transparent about all eligible activities, including any related to optimizing the efficiency of fossil fuel production.

    Firms can consider the guidance as appropriate, depending on the nature of their particular business and sustainability-related communications.

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