Written by Claire Hamer

The FCA has published its Consultation Paper CP22/20, Sustainability Disclosure Requirements (SDR) and investment labels. With the aim of tackling “greenwashing”, the Consultation Paper sets out in detail proposals for a sustainable investment products labelling regime in the UK. The proposals will be relevant to all FCA regulated firms, including funders, both for themselves and where they provide funding to or otherwise contract with other FCA regulated firms. 

The proposals are detailed in our article FCA Consultation Paper on Sustainability Disclosure Requirements and investment labels. In summary, they seek to create a more robust framework for how terms relating to sustainability – such as “ESG”, “green” or “sustainable” – can be used in order to enhance consumer trust and ensure accountability by:

  • introducing a consistent classification and labelling system for products;
  • requiring more detailed and frequent disclosures in respect of the sustainability-related features of an investment product; and
  • establishing a general “anti-greenwashing” rule, that “sustainability-related claims must be clear, fair and not misleading”.

While the majority of its rules are to come into effect no earlier than 30 June 2024, it is proposed that the general “anti-greenwashing” rule would come into effect immediately on publication of the FCA’s Policy Statement, projected to be 30 June 2023.

The consultation closes on 25 January 2023.

It will be of some comfort to funders that, recognising that firms and products that fall within the scope of the proposed regime may operate internationally and so be subject to regimes in multiple jurisdictions, the FCA’s proposals seek to maintain coherence with similar regimes in other jurisdictions, including the EU and the US. Regardless, we expect providers of “sustainable” products, including funders providing green or sustainability-linked loans, will still wish to review carefully those products to ensure compliance with the new UK “anti-greenwashing” rule, even where that review has been undertaken in the context of a similar international regime.

The FCA is clear that these proposals are the starting point for a regime intended to expand and evolve over time.  We would advise those operating in the sustainable lending space to follow developments in this area closely.