The Financial Conduct Authority (FCA) plans to phase out ‘greenwashing’, with measures including investment product sustainability labels and restrictions on how terms such as ‘ESG’, ‘green’ and ‘sustainable’ can be used.
Greenwashing is a form of advertising or marketing spin where sustainability claims are deceptively used in order to convince consumers that an organisation’s or firm’s products, aims and policies are environmentally friendly.
The FCA aims to introduce sustainable investment product labels to give consumers more confidence. It will split these into three categories – including one for products that improve their sustainability over time – with each one underpinned by objective criteria.
It aims to restrict how certain phrases can be used to help avoid misleading marketing of products. As part of this, companies will be required to produce disclosures for consumers to highlight the key sustainability-related features of any investment product. They will also have to provide more detailed disclosures suitable for institutional investors or retail investors wishing to know more about the respective product.
This means that those in the housing sector offering green initiatives must meet the new criteria to ensure that their marketing and consumer-facing disclosures are valid for customers.
According to the Energy Savings Trust, the housing market is responsible for 21% of carbon emissions in the UK. This huge role that the sector plays in emissions means it must act urgently and meet the priorities set at COP26 and then COP27.
Now is the right time to evolve green housing and green finance to make them more appealing, accessible and realistic to our customers. Many major providers are already taking a greener leap. As Esther Dijkstra, managing director of intermediaries at Lloyds, said last year: “Our main goal is to go green. This may be helped in the coming years with a rise in initiatives for customers to make greener choices, such as the government’s Renewable Heat Incentive for homeowners to help reduce carbon emissions.”
As sustainability becomes a higher priority for eco-conscious buyers, it’s essential that the right opportunities are available and that they are balanced with the FCA’s requirements.
The latest proposal from the FCA is an encouraging step forward to tackle greenwashing across financial services, and it can certainly provide guidance towards more sustainable housing initiatives as well as regulating claims to improve consumer confidence.
However, it’s important that the requirements propel change positively and that the right outcome for customers is achieved without revolving around just profits.
Before today, the sector was already taking strides towards a greener future, so it’s essential this isn’t interrupted, as these innovative ideas can lead to the growth of a green housing market and allow us all to move towards a net zero future. It’s vital that the balance is right.
James Tucker is chief executive at fintech firm Twenty7Tec