FCA tackles greenwashing with new rules

In response to growing concerns about greenwashing within the financial services sector, the UK’s Financial Conduct Authority (FCA) has implemented regulations aimed at combating this practice. As of 31 May, the FCA’s anti-greenwashing rule has come into effect.

A need for more clarity

According to Hymans Robertson, a pensions and financial consultancy, the risk of greenwashing cannot be underestimated, and its consequences extend beyond regulatory fines. Failure to comply with these regulations could result in significant financial repercussions, as well as damage to a firm’s reputation. Rebecca Macdonald, head of products at Hymans Robertson, emphasises the importance of recognising that greenwashing risk permeates every aspect of a business, from product development to marketing strategies.

“The main thing to recognise about FCA’s anti-greenwashing rule is that it’s about improving transparency, which should in turn improve customer engagement,” states Macdonald. “However, it applies to all communications, including images, that relate to products and services.”

The FCA rule demands clarity, fairness, and accuracy in sustainability claims, requiring insurers to substantiate all such claims against specific criteria. Insurers must ensure that sustainability benefits are objectively measurable and that all evidence supporting their claims is readily available.

Creating corporate accountability

Kennedys echoes the necessity for clear and substantiated communications regarding sustainability characteristics. Alex Nurse, a partner at Kennedys, emphasises the significance of these regulations in establishing greater transparency and corporate accountability within the financial services sector.

“The anti-greenwashing rule marks a significant step towards establishing greater transparency and corporate accountability for consumers,” notes Nurse. “In anticipation of regulatory scrutiny regarding compliance, firms will need to ensure that all aspects of their communications relating to the sustainability characteristics of their products and services are fair, clear, and not misleading.”

Looking ahead, insurers face the challenge of adapting to these new regulations effectively. Key steps include conducting comprehensive reviews of customer-facing materials, ensuring the substantiation of all sustainability claims, and incorporating greenwashing risk into existing risk management frameworks.

As regulatory scrutiny intensifies, insurers must remain vigilant and proactive in their compliance efforts. Collaboration with regulatory bodies and industry stakeholders will be essential in navigating the evolving landscape of sustainability regulations.

Image: Canva.

Emma Cockings Emma is a content editor for Claims Media. Emma is a experienced writer with a background in client-centric personal injury for a major firm. She has attended and reported on multiple brokerage events throughout her career.