It warns that not doing so could leave firms open to potential consequences of non-compliance. These could include the significant financial and time costs to rectify any errors, as well as possible sanctions from multiple regulators. This is because greenwashing risk can be difficult to assess and, therefore, manage effectively. The leading pensions and financial consultancy says, insurers should prepare thoroughly as greenwashing is a focus, not only for the FCA, but for several other regulators in the UK market such as the Advertising Standards Authority. This will likely mean further regulatory scrutiny in the future as the landscape evolves.
The FCA rule requires sustainability claims to be clear, fair, not misleading and consistent with the sustainability profile of the product or service. To comply, insurers will be responsible for ensuring that all their sustainability claims can be evidenced against these requirements.
Commenting on how insurers can manage their compliance to the FCA’s anti-greenwashing rule Rebecca Macdonald, Head of Products, Hymans Robertson says: “The main thing to recognise about FCA’s anti-greenwashing rule is that it’s about improving transparency, which should in turn improve customer engagement. These are good things for the industry to focus on. However, it applies to all communications, including images, that relate to products and services. And because the risk of greenwashing isn’t limited to one point in a product or services’ lifecycle, it is inevitable that firms will find there is additional cost to ensure ongoing compliance.
“There are ways that insurers can minimise the impact of getting their products and services into a good place. Namely reviewing their materials and any claims and checking that they’re evidenced as well asensuring that greenwashing risks are fully incorporated into existing risk management frameworks.
“Greenwashing is high on the agenda of regulators in general and many insurers will find that they’re subject to anti-greenwashing rules from more than one regulator. The FCA has pointed out that they have worked with the CMA, the Competition and Markets Authority and ASA, the Advertising Standards Authority to ensure consistency within the UK. The European Insurance and Occupational Pensions Authority has also opened a consultation on greenwashing, with the view to create a more effective and harmonised supervision of sustainability claims across European firms. This focus will no doubt be maintained, and insurers should look to take every possible step now to be ready.”
Key next steps for insurers ahead of FCA’s anti-greenwashing rule coming into effect are:
• Conduct a thorough review of customer facing materials to identify any sustainability claims
• Check that all claims are substantiated and all evidence is available
• Check that sustainability benefits are objectively measurable
• For thorough compliance consider obtaining an external review of customer materials
• Incorporate greenwashing risk into your existing risk management framework.
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