New rules to crack down on greenwashing proposed by UK watchdog

New measures proposed by a UK watchdog to help crack down on greenwashing could see restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ are used.

The Financial Conduct Authority (FCA) said Tuesday it is proposing a package of new measures to tackle greenwashing, which has been an increasingly important conversation within fashion and other industries as consumers struggle to see past vague or deceptive sustainability claims.

The watchdog is proposing the introduction of ‘sustainable investment product labels’, which will be “underpinned by objective criteria”, and will come in three categories, including one for products improving their sustainability over time.

There would then be restrictions on the use of sustainability-related terms such as ‘ESG’, ‘green’ or ‘sustainable’ in the names and marketing for products that don’t qualify for the labels.

'Greenwashing erodes trust'

It is also proposing a more general “anti-greenwashing” rule covering all regulated firms to help avoid misleading marketing of products.

Sacha Sadan, the FCA’s director of environment social and governance, said: “Greenwashing misleads consumers and erodes trust in all ESG products. Consumers must be confident when products claim to be sustainable that they actually are. Our proposed rules will help consumers and firms build trust in this sector.”

“This supports investment in solutions to some of the world’s biggest ESG challenges. This places the UK at the forefront of sustainable investment internationally. We are raising the bar by setting robust regulatory standards to protect consumers in line with our wider FCA strategy.”

The FCA’s consultation is open until January 25, while it intends to publish its final rules by the end of the first half of 2023.