Regulator’s rule switch plan to tackle eco-friendly claims

The Financial Conduct Authority (FCA) is proposing a set of new rules as part of plans to clamp down on “greenwashing”.

The UK regulator said measures would include sustainability labels on investment products and restrictions on how terms such as ESG, green or sustainable can be used.

The watchdog said there has been growth in the number of products described as “green” or that make wider sustainability claims.

It warned that “exaggerated, misleading or unsubstantiated” claims can damage confidence in financial products.

It comes after the Advertising Standards Authority banned two posters referring to HSBC’s investment in helping its clients reach net zero and its tree-planting initiative.

The regulator received complaints saying the adverts were misleading because they “omitted significant information about HSBC’s contribution to carbon dioxide and greenhouse gas emissions”.

“Greenwashing misleads consumers and erodes trust in all ESG products. Consumers must be confident when products claim to be sustainable that they actually are,” said Sacha Sadan, FCA’s director of environment, social and governance.

Proposed rules include providing consumerfacing disclosures to help customers understand key sustainability features of an investment product.