FCA publishes final anti-greenwashing guidance, SDR-extension proposals

Rashim Arora
green area
The FCA has laid out final guidance on anti-greenwashing, opened a consultation to extend sustainability disclosure rules (SDR) to portfolio management, and published a roadmap to apply it to the overseas fund regime (OFR). Rashim Arora explains what this means for financial services.

The FCA laid out the final non-handbook guidance on its anti-greenwashing rule that comes into force on 31 May 2024. This follows a consultation on draft guidance (GC23/3) that was published in November 2023, aiming to clarify the rule for firms.

The final guidance follows the draft guidance very closely but provides clarification on scope. Further examples include good practices and clarification of the interrelation between the anti-greenwashing rule and aspects of sustainability disclosure requirements (SDR).

The FCA also opened CP24/8 on 23 April, which seeks input on extending the SDR and investment labels regime to portfolio management, applying a similar approach to labelling for portfolio managers as introduced for fund managers. The consultation closes on 14 June.

The proposed rules are aimed at firms providing wealth management services, model and bespoke portfolios. The FCA will publish final rules in the second half of 2024, with the labelling regime, naming and marketing rules, and disclosure requirements expected to take effect on 2 December 2024. The Government will also consult in Q3 2024 on extending the SDR to OFR funds, which could enter into force in the second half of 2025.

Sustainability disclosure requirements – what’s changed?
The FCA has published its final rules on the sustainability disclosure requirements (SDR). We look at the key changes.
Sustainability disclosure requirements – what’s changed?
Read this article


The anti-greenwashing rule applies when a firm communicates with UK clients regarding a product or service or disseminates a financial promotion to a person in the UK. This rule refers to sustainability characteristics (environmental and/or social characteristics) of a product or service and requires firms to ensure that any references to the sustainability characteristics of a product or service are consistent, fair, clear, and not misleading.

The rule applies to all UK-authorised firms, regardless of whether they're subject to the Consumer Duty. Any mention of the Duty in the FCA’s guidance is intended to help firms understand how the anti-greenwashing rule and the Duty interact.

Learn more about how our Consumer Duty services can help you
What can you expect from the FCA's new rules on Consumer Duty? Get all our guidance and insight in one place.
Learn more about how our Consumer Duty services can help you
Visit our Consumer Duty page

Existing requirements and related guidance

While the scope of the anti-greenwashing rule relates to products and services, the FCA has reminded firms that the CMA and ASA’s guidance and FCA Principles 6 and 7 or, as relevant, the Consumer Duty (Principle 12 and the rules in PRIN 2A), apply to sustainability-related claims that a firm may make about itself.

The guidance also says firms should consider whether information about the firm itself may be considered part of the 'representative picture' of a product or service, which would bring this information in scope. It's not clear when and how the FCA will consider information to be part of the representative picture. 

Firms will need to consider carefully claims made about itself as they will certainly be subject to existing consumer protection law as well as existing FCA principles, and may also fall under the new rule. This potentially imposes a very high risk to firms who want to brand themselves as sustainably focused.

Regulatory expectations

1 Claims should be correct and capable of being substantiated

Claims must be accurate – firms should avoid saying or suggesting things about a product or service that aren't true. This includes exaggerating the positive environmental or societal impact of a product or service. Claims can also be misleading if they provide conflicting or contradictory information.

The FCA has made it clear that products or services should do what they claim they do, and firms should be able to support those claims with credible evidence. Claims should be capable of being proven at the time they're made – this requires firms to consider whether they have the appropriate evidence to support their claims.

Additionally, it’s important to regularly review claims and any supporting evidence, meaning that claims must be supported throughout the time they're communicated. The claims that firms make will have to comply with the anti-greenwashing rule on an ongoing basis.

The regulator noted that firms that approve financial promotions under COBS 4 should consider compliance with the anti-greenwashing rule as part of their monitoring of the ongoing compliance of the financial promotion which they've approved.

If claims are backed up with evidence, firms should consider making this information accessible to the public.

2 Claims should be clear and presented in a way that can be understood

The FCA has emphasised that it requires that firms’ sustainability claims be clear and easy to understand. Firms should consider whether the meaning of all the terms would be understood by the intended audience.

For example, technical language may be difficult to understand, so firms should consider whether they need to explain certain terms. It's important that firms don't use terms that might give the impression that a product or service has sustainability characteristics that it doesn't have.

Notably, firms should also be aware of the overall impression a visual presentation of a claim can create, considering how images, logos, and colours together may be perceived by the audience when presented alongside other sustainability characteristics. Claims may be undermined if what they say is factually correct, but their visual presentation conveys a different impression.

Firms that are in scope of Consumer Duty should test their communications where appropriate – ensuring communications are likely to be understood by customers and meet their information needs so they can make well-informed decisions.

Firms subject to the Duty should also ensure they have the necessary information to understand and monitor customer outcomes.

3 Claims should be complete – they shouldn't omit or hide important information

The FCA requires that claims provide an accurate and fair representation of the product or service. This means including important information that could influence decision making. Similarly, any limitations of the information, data, or metrics used in a claim should be clearly and prominently disclosed.

Claims should present both positive and negative sustainability impacts, as well as take into account the entire life cycle of a product or service when making sustainability-related claims.

The regulator expects firms to think about what information is necessary to include in the claim to ensure it provides a representative picture of the product or service.

4 Comparisons should be fair and meaningful

When comparing a product or service, whether to a previous version or to a competitor's, firms must ensure that their claims are fair and meaningful. The FCA said that comparisons should provide the audience with the information they need to make informed choices about the products or services.

The regulator warns firms to be cautious when making claims about the extent to which a feature of a product or service has sustainability characteristics, especially when it may only be meeting the minimum standard of compliance with legal requirements. Such claims could be misleading, as while they may be true, they may wrongly give the impression that their product or service is superior to others available. When making comparative claims, any evidence to substantiate those claims should cover all the products or services being compared.

What’s next for financial services firms?

Greenwashing is a high-risk area for all regulated firms that make any sort of claim about being sustainable. When the new rule comes into force on 31 May, the FCA is likely to be proactive in terms of enforcement.

Firms should review all communications that refer to the sustainability characteristics of products and services in light of the guidance and ensure that they have the appropriate controls and governance in place.

Learn more about how our ESG in financial services services can help you
Build and protect resilient systems for a net zero future
Learn more about how our ESG in financial services services can help you
Visit our ESG in financial services page

To learn more about greenwashing risks, SDR, and investment labels, contact Rashim Arora.


Get the latest insights, events and guidance for financial services professionals, straight to your inbox.