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August 1, 2022

Regulatory Briefing: FCA consumer duty could play anti-greenwashing role

The decision by the UK’s Financial Conduct Authority to impose a new consumer duty on financial institutions could play a significant role in countering greenwashing, according to regulatory experts.

The new duty creates an overarching principle that consumers should receive communications they can understand, as well as products and services that meet their needs and offer fair value. They must also get the customer support they need, when they need it.  According to the FCA, this new duty is part of its strategic shift to becoming “a more assertive and data-led regulator”.

Barry Faudemer, chief executive of consultancy Baker Regulatory Services, believes that as a consequence, greenwashing could attract big fines. He told Sustainable Views: “Financial products with green credentials have become big business, and this has also brought with it the risk of the over-enthusiastic promotion of the environmental credentials of a product to clinch the deal.”

Firm enforcement. Previous regulatory rules have suffered from a lack of enforcement – but that may now change if the FCA acts firmly. Faudemer said: “It remains to be seen if the new consumer code has the desired impact, but I suspect it will take some eye-watering fines before greenwashing is curtailed and we can have full confidence in the green credentials presented to us.”

The FCA is giving firms 12 months to implement the new rules for all new and existing products and services that are currently on sale.

A service from the Financial Times