FCA will ‘take appropriate action’ against product greenwashing which misleads customers
The UK Financial Conduct Authority (FCA) says it will challenge firms and take appropriate action where it sees “potential greenwashing of products or services” to prevent customers from being mislead.
The FCA IS holding companies to account for greenwashing.
Outlining the actions it will be taking on climate change and green finance with financial institutions (FIs) and other regulators, the FCA says it will engage with and consider the EU’s sustainable finance action plan (SFAP) proposals “particularly around common standards and product disclosures”.
“Common definitions and standards are being developed, but this will take time,” says the regulator. “Without these, there is a risk that consumers suffer harm from ‘greenwashing’. We want to protect consumers from this in a proportionate way that allows firms to innovate to meet consumers’ needs and preferences as the market continues to develop.”
The FCA’s action plan was published in a feedback document following the release of the Green Finance Strategy (GFS) in July 2019, which emphasises the role of FIs in financing the ‘greening’ of the economy and reach the UK government’s legally binding commitment to zero greenhouse gas emissions by 2050.
The UK regulator listed a series of industry worries regarding the environment. These included how to determine the materiality of climate change risks, the need for climate risk disclosure requirements, the difficulty for investors identifying genuinely green activities to invest in, the ‘short-term results culture’ in finance which conflicts with long-term green targets and the need for more active industry engagement.
As well as holding companies to account for greenwashing, the regulator also wants to publish various documents off-the-back of its research. In early 2020, the FCA will publish a consultation paper clarifying existing disclosure obligations relating to climate change risks, and propose new disclosure rules on a ‘comply or explain’ basis.
By the end of 2019, the regulator also wants to finalise proposed rule changes requiring Independent Governance Committees
(IGCs) to oversee and report on firms’ environmental, social and governance (ESG) policies.
In terms of collaboration, the FCA wants to work jointly with the government, other regulators and the industry to support initiatives such as the EU’s environmental SFAP.
