The UK's financial watchdog has published guidance on how to approach its upcoming anti-greenwashing rule which comes into force on 31 May.

The Financial Conduct Authority (FCA) is introducing the new rule in a bid to ensure firms are aware that sustainability-related claims about their products and services must be fair, clear and not misleading.

The regulator says that the move gives it an explicit rule on which it can challenge firms if it thinks they are making misleading sustainability-related claims.

The FCA's guidance comes after its latest Financial Lives survey revealed that 81 per cent of adults would like their investments to do some good as well as provide a financial return.

The anti-greenwashing rule forms part of a package of measures finalised by the FCA in November through its Sustainability Disclosure Requirements (SDR) and investment labels regime.

The FCA is also consulting on extending to portfolio managers the requirements on how sustainable investments are labelled and explained. These are firms that manage a group of investments for consumers, which can either be offered as standardised products or tailored services.

These proposals largely mirror those introduced for asset managers in November 2023, which include product labels to help consumers understand what their money is being used for and naming and marketing requirements so products can only be described as having positive outcomes on the environment or society when those claims can be backed up.

“Confirming the new anti-greenwashing guidance and our proposals to extend the Sustainability Disclosure Requirements and investment labels regime are important milestones that maintain the UK’s place at the forefront of sustainable investment, said Sacha Sadan, director of environmental, social and governance, FCA. "Our good and poor practice anti-greenwashing examples will help firms market their products in the right way."

This work supports the long-term growth and competitiveness of the sector by helping businesses meet this demand and ensuring consumers who invest in sustainability-related financial products can make informed decisions.

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