New rules from the Financial Conduct Authority (FCA) aimed at tackling greenwashing in the financial sector have come into effect as of 31 May.

The package of measures is designed to crack down on greenwashing and help consumers navigate the growing market for environmental, social and governance (ESG) investments.

The key elements now in force include an anti-greenwashing rule applying to all FCA-authorised firms making sustainability claims about products and services. Any such claims must now be fair, clear and not misleading.

For UK asset managers, there are new investment labels, disclosure requirements and restrictions on naming and marketing of sustainable investment funds. Consumer-facing and detailed product-level disclosures are mandated, with processes such as notifying the FCA of labelled funds. Distributors must make labels and disclosures available.

Consumer-facing and detailed product-level disclosures are mandated, with firms needing to follow processes such as notifying the FCA of labelled funds. Distributors of retail investment products must also make the labels and disclosures available.

Sacha Sadan, the FCA's ESG Director, stated: "Consumers care about investing in products that have a positive impact. That's why we want to boost market integrity and ensure people can make informed decisions with their money."

Richard Andrews, KPMG's UK head of ESG, commented on the new anti-greenwashing rules: "While we expect the FCA to take a pragmatic approach and give authorised firms some leeway while they embed the expectations, firms should not underestimate the scale of work required.

“They will need to be able to demonstrate that they have understood the scope of the requirements and are able to substantiate sustainability-related claims in all their communications relating to financial services and products in the UK."

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