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In this article, John Sharpe, Senior Relationship Manager at Triodos Bank UK, explores the FCA’s new Anti-Greenwashing Rule – and what it means for businesses looking for sustainable finance

Consumer demand for products and services that prioritise environmental and social responsibility shows no sign of waning, but with so many brands clamouring to share their sustainability credentials, it’s often difficult to spot the truth from the greenwash. The financial services sector is no exception and our own research in partnership with Ethical Consumer magazine[1] – which looked at how customers’ expectations of their ISAs matched up to their financial providers’ environmental standards – showed that UK savers and investors are sceptical about financial providers’ sustainability claims.

And for businesses that prioritise environmental and social responsibility, a lack of clear guidance on what constitutes sustainable finance has often made it difficult to find products and services that align with their values.

The Financial Conduct Authority (FCA)’s new Anti-Greenwashing rule attempts to tackle this by ensuring that any sustainability-related claims about financial products and services are fair, clear and not misleading – and can be fully substantiated. This applies to any claims relating to environmental and/or social characteristics.

What the rule covers

All FCA-authorised firms are subject to the rule, which came into force on 31 May and relates to all communications about products and services that refer to sustainability. This includes statements, assertions, strategies, targets and polices, as well as visual representations including images.

The rule requires sustainability claims to be fully evidenced and the FCA will challenge firms it considers may be making misleading claims and take action where appropriate.

A step in the right direction

As a bank with sustainability integrated into the core of our business model, we support the need for clear requirements around greenwashing and for regulations that make it easier to find genuinely sustainable products and services. As the FCA has pointed out, if consumers – and businesses – know they can trust sustainability-related claims, this will ultimately increase confidence in the sustainable finance market and encourage greater flow of capital into products that can genuinely drive positive change.

However, while the guidance will make it harder for financial services firms to make unsubstantiated claims relating to sustainability, it continues to place the burden on those working to make sustainable change, rather than increasing the requirements for overall transparency that would enable informed choices between products with positive and negative environmental impacts. What the industry really requires are mechanisms that drive the whole financial sector to become more sustainable, and we are yet to see this.

For now, the best way to get an idea of whether a product is genuinely sustainable is to look at a bank’s lending and investment portfolio.. Are lenders transparent about where they lend money? Are environmental or social claims substantiated and applied across their operations and not just on specific products offered?

The FCA’s new rule is an important step in the right direction. We need tighter regulations, coupled with a shift towards greater transparency, which will ultimately make it far easier for businesses to understand the true nature of a bank’s sustainability and help them to find a financial partner that shares their priorities.. 

If you’d like to talk to us about sustainable finance for your business, please contact me at [email protected].

[1] The research combined consumer polling with independent ratings of financial services providers from Ethical Consumer: