New ESG Rules Aim to Stop Greenwashing: How Financial Firms Can Get Ahead

With the UK Financial Conduct Authority (FCA) introducing stricter ESG disclosure rules to protect consumers from misleading claims and raise the industry's standards, financial firms are under increasing pressure to prove that what they’re selling is genuinely sustainable. 

As it becomes increasingly vital for firms to enhance the accuracy, transparency, and governance behind their ESG strategies, we break down the key regulatory changes where firms often fall short and outline practical steps they can take to lead with integrity and confidence.

What the new FCA ESG rules are

Tackling greenwashing is a top priority for the FCA. Its 2022 Financial Lives Survey showed that 74% of those surveyed agreed that environmental issues are important to them, while 79% agreed that businesses have a greater social responsibility than “simply making a profit” (1).

As a result, last April, the FCA confirmed a set of new measures under its Sustainability Disclosure Requirements (SDR) and anti-greenwashing rule to reflect an increasing focus on ensuring that sustainability claims are not only well-intentioned but credible and evidence-based.

Alongside this, they introduced a new voluntary product labelling regime. This enables investment products, provided they meet certain criteria, to use one of four sustainability labels. These help consumers understand the purpose and approach behind a fund, whether it focuses on sustainable assets, drives improvements, or aims for impact. Importantly, firms using these labels will also need to publish accompanying disclosures that state the product’s sustainability goals, how those goals are being observed, and how progress is measured.

However, these measures are more than compliance tools. They’re part of a wider effort to restore trust and raise standards in ESG investing.

Where firms often slip up

Despite growing awareness, greenwashing remains a problem, and it’s not always deliberate. In many cases, firms fall short because of a lack of consistency between what is said externally and what is happening internally.

One of the most common issues is overstating sustainability credentials. Vague terms like ‘sustainable’, ‘responsible’, or ‘green’, can make it hard for investors to understand what they actually mean. Also, if the ESG narrative in sales materials isn’t matched by objectives or performance data, firms risk misleading their clients, undermining credibility, and falling foul of the new rules. ESG claims can also drift over time, resulting in outdated or unsupported statements remaining in circulation due to a lack of monitoring.

Five ways to meet the FCA’s ESG disclosure requirements

To meet the FCA’s expectations and lead in an increasingly competitive ESG market, firms need to embed good practices across their ESG governance, documentation, and reporting.

How to achieve this? 

Review existing ESG claims and communications
Conduct internal audits to check that sustainability claims are accurate, clearly stated, and supported by evidence. Make sure any ‘green’ language reflects actual outcomes and investment strategies.
Improve supporting documentation
Align fund objectives, methodologies and performance data with the claims being made externally. Avoid technical jargon and ensure disclosures are understandable to your target audience.
Use independent verification where appropriate
Third-party assurance can help validate ESG claims and demonstrate rigour to clients and regulators alike.
Consistently track and report ESG metrics
Adopt recognised frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) or SASB Standards to monitor impact, progress and risks. Regular reporting ensures transparency and builds long-term trust.
Invest in ESG training and culture
Equip teams across compliance, marketing, product and investment functions with the knowledge and tools they need to meet new expectations.

Founded by Portia Patel and Justin Bates, both top-ranked analysts working in London’s investment industry, ESGmark® was created to simplify ESG complexities and provide a trusted certification framework.

Justin Bates, Co-Founder of ESGmark®, says the key is viewing the new rules as an opportunity, rather than a requirement. “The firms that will thrive are those that treat ESG as a core part of their strategy. Clear disclosures and credible claims are now essential, and clients are rightly asking more questions. Firms don’t need to have all the answers today, but they do need to be transparent about where they currently are as well as where they’re heading.”

Final thoughts

With the right processes, transparency and consistency in their reporting, financial firms have a real opportunity not just to meet the new greenwashing rules, but to build lasting trust while helping to shape a more sustainable future.

How ESGmark® can help

At ESGmark®, we help organisations to credibly demonstrate their Environmental, Social, and Governance (ESG) credentials to position themselves as a partner of choice. We do this through ESGmark® Certification, carbon footprint measurement, and consultancy. We believe raising industry standards through transparency and collaboration is the fastest route to real change.

To explore how ESGmark® can support your agency, please don’t hesitate to get in touch with us or request more information here.

Sources

Financial Conduct Authority (FCA) (2024). Finalised non‑handbook guidance on the Anti‑Greenwashing Rule. [online] FCA. Available at: HYPERLINK "https://www.fca.org.uk/publication/finalised-guidance/fg24-3.pdf"https://www.fca.org.uk/publication/finalised-guidance/fg24-3.pdf.
Financial Conduct Authority (FCA) (2024). FCA confirms anti-greenwashing guidance and proposes extending sustainability framework. [online] FCA. Available at: https://www.fca.org.uk/news/press-releases/fca-confirms-anti-greenwashing-guidance-and-proposes-extending-sustainability-framework.
Financial Conduct Authority (FCA) (2024). Sustainability Disclosure and Labelling Regime. [online] FCA. Available at: https://www.fca.org.uk/firms/climate-change-and-sustainable-finance/sustainability-disclosure-and-labelling-regime.
Morgan Lewis (2024). UK Financial Conduct Authority adopts new anti-greenwashing rule and guidance. [online] Morgan Lewis. Available at: https://www.morganlewis.com/pubs/2024/08/uk-financial-conduct-authority-adopts-new-anti-greenwashing-rule-and-guidance.
Sustainability Accounting Standards Board (SASB) (2024). SASB Standards. [online] IFRS Foundation. Available at: https://sasb.ifrs.org/.