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UK’s financial watchdog vows to crack down on greenwashing

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The FCA said that 83 per cent of the firm's DB scheme transfer advice "failed to comply with its minimum required standards, and customers risked financial loss as a result of the poor advice they received".
The FCA said that 83 per cent of the firm's DB scheme transfer advice "failed to comply with its minimum required standards, and customers risked financial loss as a result of the poor advice they received".

The UK’s financial watchdog has said it is “actively” monitoring the markets for instances of greenwashing, involving false and exaggerated claims around ESG.

The Financial Conduct Authority (FCA) told City PM that it has “made it a priority that investors are given clear and reliable information about ESG products,” as the watchdog said it is ready to “respond” to cases of “serious misconduct.”

“We have made it a priority to ensure that investors are given clear and reliable information about ESG products,” the FCA spokesperson said. “This includes considering where new rules are needed. We actively monitor this sector and will respond where we see serious misconduct.”

The comments come after observers suggested it is only a matter of time before the UK’s watchdog comes down hard on greenwashing, after both US and German regulators launched their own crackdowns on false ESG claims.

Germany’s crackdown last week saw the country’s BaFin financial watchdog raid the offices of Frankfurt headquartered asset manager DWS, and its majority owner Deutsche Bank, over claims the firm had made misleading statements around ESG credentials.

Last month, the US Securities and Exchanges Commission (SEC) also set out plans to crack down on false ESG claims, after the watchdog fined New York firm BNY Mellon $1.5m for misstating and omitting information regarding its ESG investment products.

The US and German actions come after the UK’s FCA last year said ESG claims must be “reasonable and substantiated,” as the watchdog warned that it had begun to see a growing number of claims that “do not bear scrutiny.”   

In November, the FCA later set out plans to boost the credibility of the ESG sector, as it vowed to “challenge” firms when it sees “evidence of potential greenwashing”.

Browne Jacobson associate Kirsty Finlayson said ESG claims by UK companies are likely to come under mounting scrutiny, as shareholders, regulators, and environmentalists increasingly seek to hold them to account – particularly in instances when those companies have made false claims.

“Companies will always risk opening themselves up to regulatory or shareholder action where there are inconsistencies between a company’s public position in relation to environmental issues and its internal activity,” Finlayson said.