The Financial Conduct Authority's anti-greenwashing rules come into force today (May 31) and should have a substantial impact on the industry, according to experts.
The regulator hopes the new rules will protect consumers from misleading sustainability claims.
Consultation on scheme first took place in October 2022 and the outcomes were published in November 2023, following delays.
Richard Weighell, financial services advisory partner at accounting and business advisory firm BDO said the firms have had time to prepare for the new rules.
He said: “By now, they should have substantially completed their programmes of work to ensure sustainability-related claims in their communications are clear, fair and not misleading.
“Given the long lead time ahead of the introduction of the AGR, we expect the FCA to immediately be monitoring firms’ sustainability-related claims, taking supervisory action where necessary.”
Cadi Thomas, investment consultant at Isio said it was a significant advancement in regulatory oversight.
She said: “The comprehensive nature of these rules, covering all communications for FCA-regulated firms, promises a substantial impact.
“This wide-reaching approach, however, also highlights certain ambiguities, particularly regarding the required level of due diligence on third-party information and the management of past communications.”
Despite this, Thomas said the anti-greenwashing rules were a positive development to enhance transparency and reliability in sustainable claims.
Chris Fidler, head of global industry standards at CFA Institute, analyses trends for ESG investing.
He said sustainability disclosure requirements are not a perfect solution.
Fidler said: “Retail investors can’t simply close their eyes, look at a fund’s name or label, and trust it will be in line with their values and financial goals. They still need to investigate and monitor their investments to make sure they understand where their money is going.”
“These issues are complex and we shouldn’t let perfect be the enemy of good; we will need to continue to examine how SDR works in practice to assess its effectiveness.”
tara.o'connor@ft.com
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