As green initiatives for consumers sector-wise rise, the Financial Conduct Authority (FCA) last week announced its plans to clamp down on greenwashing with new regulations. The new rules will limit how terms like ESG, Green or sustainable can be used, meaning that products need to sport sustainable investment product labels.

What is greenwashing?

Greenwashing is when a company misleads consumers into believing they are doing more to protect the environment than it really is. It’s a deceitful marketing tactic to target customers who prefer to buy products from environmentally conscious brands.

What are the new FCA regulations?

The FCA has proposed various regulations to keep greenwashing under wraps and discourage it from happening. As part of this, it proposes introducing restrictions on how particular sustainability-related terms such as ESG, Green or Sustainable are used in product names and marketing, helping eradicate misleading marketing messages.

It wants to introduce sustainable investment product labels to give consumers more confidence when shopping. There will be three categories for the labels, each underpinned by objective criteria.

And it will introduce consumer-facing disclosures to help buyers understand exactly what the critical sustainability-related feature of an investment product is, as well as more detailed disclosures for institutional investors or retail investors that want to know more.

For those in the housing and development sector, these new proposals mean that any green initiative must meet the new regulations and that great care is taken when developing marketing materials to ensure they are accessible and transparent.

Sacha Sadan, the FCA’s director of environment social and governance, said:

“Greenwashing misleads consumers and erodes trust in all ESG products. Consumers must be confident when products claim to be more sustainable that they actually are. Our proposed rules will help consumers and firms build trust in this sector. This supports investment in solutions to some of the world’s biggest ESG challenges. This places the UK at the forefront of sustainable investment internationally. We are raising the bar by setting robust regulatory standards to protect consumers in line with our wider FCA strategy.”

What is the impact of the housing sector on net zero?

Although the finger is pointed heavily at cows or cars when discussing a greener future, the housing market holds around a quarter of the responsibility. Findings from the Energy Savings Trust reveal that the housing sector is responsible for 21% of carbon emissions in the UK.

Net zero can’t be something we ignore. The housing sector has to look at how we can evolve to go greener and act fast to meet the goals of COP26. For it to work, we must make green finance accessible, appealing and realistic to customers.

Many major providers are already taking great green strides, as Esther Dijkstra, managing director of Intermediaries at Llyods, told us 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 our carbon emissions.”

With sustainability at the forefront of many consumers minds, it’s up to the sector to meet the demand and ensure we have the right opportunities for them that meet the FCA’s regulations.

What does the FCA’s proposal mean for the housing industry?

The FCA’s latest proposal comes at a time when greenwashing needs to be addressed. More clear-cut guidelines can be used to develop more robust and authentically sustainable consumer offerings.

However, the sector was already making bold movements towards a greener future organically before this proposal while overcoming significant national and international challenges. So the FCA’s new guidelines mustn’t come between green innovation and instead complement the housing market’s ambition to give sustainable solutions to customers without revolving around profits.

The customer must always come first, and while the market will rise to meet the FCA regulations, the products must remain effective for the customer. They can’t be disengaged by the importance of what we’re doing.

James Tucker, CEO at Twenty7Tec