Advisers' Sustainability Group urges FCA to clarify green finance guidance
Financial advisers need clearer FCA guidance on sustainability claims
The Financial Conduct Authority's Advisers' Sustainability Group has called for greater regulatory clarity on green finance rules. Consequently, this highlights a practical problem: advisers are being asked to discuss sustainability with clients, but the guidance they need to do so confidently remains incomplete. The group was formed in January 2024 to help advisers handle sustainability investment questions. However, gaps in FCA direction are creating uncertainty that may slow uptake of the group's recommendations.
This uncertainty matters because financial advisers increasingly face client questions about sustainable investments. Meanwhile, the regulator has introduced new rules to prevent greenwashing and improve product disclosures. Those measures took effect in 2024, yet advisers report they still lack the detailed guidance needed to apply them consistently in client conversations.
The issue reflects a wider challenge across UK sustainable finance. Regulators want to reduce misleading environmental claims and improve consumer trust. Nevertheless, firms need practical clarity to meet those standards without excessive caution or confusion. For SMEs working with financial advisers or procurement teams, this regulatory uncertainty can affect investment decisions, supplier assessments, and corporate sustainability planning.
FCA anti-greenwashing rules came into force in 2024
The FCA created the Advisers' Sustainability Group specifically to build sustainability advice capability across the financial sector. The group agreed its terms of reference in March 2024. Its objectives included developing voluntary good-practice guidelines for advisers and recommending training materials to support sustainability conversations with clients.
This work sits within the FCA's broader sustainable finance framework. The regulator introduced an anti-greenwashing rule that took effect on 31 May 2024. This rule requires all sustainability-related claims to be fair, clear, and not misleading. In addition, the FCA launched consumer-facing sustainability labels on 31 July 2024. Naming and marketing rules for asset managers followed on 2 December 2024.
The FCA has stated these measures aim to help consumers navigate sustainable investments, improve transparency, and reduce misleading claims. Specifically, the regulator's guidance says firms must ensure sustainability claims are correct and capable of substantiation, clear, comparable, and complete. Firms must be able to demonstrate that any environmental or social claim made about a product is accurate and supported by evidence.
Despite these rules, industry participants report that ambiguity remains in parts of the guidance. For example, advisers may be uncertain about how to assess whether a product's sustainability credentials meet the FCA's standards. Similarly, questions persist about what level of detail is required when explaining sustainability features to clients. The ASG has therefore urged the FCA to provide additional clarification in these areas.
Advisers face growing pressure to discuss sustainability with clients
Financial advisers are now expected to raise sustainability preferences during client discussions. This expectation has grown as consumer interest in environmental, social, and governance factors has increased. However, the regulatory framework supporting those conversations is still developing. As a result, advisers may be reluctant to engage deeply with sustainability topics if they are unsure how the FCA will interpret their compliance.
This caution has commercial consequences. If advisers avoid sustainability discussions because of regulatory uncertainty, clients may receive less information about relevant investment options. Furthermore, this could slow the adoption of sustainable financial products and reduce market confidence in green investment claims. For businesses seeking capital or working with financial partners, this uncertainty can complicate funding decisions and sustainability planning.
The FCA has acknowledged that its sustainable finance regime is still being built out. The regulator continues to develop reporting requirements and other disclosure standards. Nevertheless, advisers are operating under the current rules now, and they need clarity to apply those rules effectively. The ASG's concerns suggest that voluntary good-practice guidelines alone may not be sufficient without stronger regulatory direction.
Moreover, the lack of clarity affects not only advisers but also the businesses they serve. SMEs considering sustainable investments or seeking finance for environmental projects need confidence that the products they are shown meet genuine standards. If advisers cannot easily verify sustainability claims, businesses may struggle to identify credible options. This uncertainty can delay investment decisions and reduce the effectiveness of corporate sustainability strategies.
Regulatory ambiguity may slow sustainable finance adoption
The tension between the FCA's anti-greenwashing ambitions and the practical needs of advisers creates several risks. First, regulatory uncertainty may lead advisers to adopt overly cautious approaches. If advisers are unsure how the FCA will assess their compliance, they may avoid recommending sustainable products altogether. This outcome would undermine the regulator's goal of improving access to reliable sustainability information.
Second, inconsistent application of the rules could emerge across the market. Without detailed guidance, different advisers may interpret the FCA's requirements in different ways. Consequently, clients may receive varying levels of information or different assessments of the same product. This inconsistency can erode trust in sustainable finance and make it harder for consumers to compare options.
Third, businesses using financial advisers for capital raising or investment planning may face delays. If advisers need to conduct additional due diligence to satisfy unclear regulatory standards, the process of arranging finance or selecting investments may take longer. For SMEs with tight timelines or limited resources, these delays can have material impacts on business planning and cash flow.
The FCA's anti-greenwashing rule itself is clear in principle. Claims must be substantiated, transparent, and not misleading. However, applying that principle to specific products and client scenarios requires detailed guidance. For example, advisers need clarity on what documentation is sufficient to substantiate a sustainability claim. They also need guidance on how to explain complex environmental impacts in ways that meet the FCA's requirement for clarity without oversimplifying.
In addition, advisers need practical examples of compliant and non-compliant behaviour. The FCA has provided some guidance, but industry participants report that more detail would help. Specifically, advisers have asked for clarity on how to handle situations where a product has some sustainability features but does not meet all criteria for a formal label. They also need guidance on how to discuss trade-offs, such as when a product has strong environmental credentials but higher costs.
What financial advisers and businesses should know now
The following points summarise the current position and its implications for businesses working with financial advisers or managing sustainability investments:
- The FCA's anti-greenwashing rule has been in force since 31 May 2024, requiring all sustainability claims to be fair, clear, and substantiated.
- Sustainability labels for investment products became available from 31 July 2024, with naming and marketing rules for asset managers taking effect on 2 December 2024.
- The Advisers' Sustainability Group was convened in January 2024 and published voluntary good-practice guidelines, but has called for further FCA clarification to reduce uncertainty.
- Advisers report that gaps in regulatory guidance may lead to cautious approaches, potentially reducing the availability of sustainability-focused advice.
- Businesses seeking sustainable investments or finance for environmental projects should expect advisers to ask detailed questions about sustainability credentials and supporting evidence.
- The FCA continues to develop its sustainable finance framework, including additional reporting requirements and disclosure standards.
Commercial and compliance considerations for UK businesses
For SMEs, this regulatory uncertainty has several practical implications. Businesses raising capital or seeking investment should be prepared to provide detailed evidence of sustainability claims. Financial advisers will increasingly require documentation that demonstrates environmental or social impacts. This documentation must be clear, comparable, and capable of independent verification.
In addition, businesses should consider how sustainability factors affect procurement and supplier relationships. If financial advisers are scrutinising sustainability claims more carefully, procurement teams should apply similar standards to supplier assessments. Sustainable procurement support can help businesses develop consistent criteria for evaluating environmental claims across their supply chains.
Furthermore, businesses participating in public sector tenders should note that sustainability criteria are becoming more detailed and more frequently assessed. PPN 06/21, which requires suppliers to publish carbon reduction plans, is one example. However, broader expectations around environmental and social performance are also emerging. Businesses should ensure they can substantiate any sustainability claims made in tender responses with the same rigour that the FCA now expects from financial products.
For businesses developing carbon reduction plans or working towards net zero targets, the FCA's approach offers useful guidance. The regulator's emphasis on substantiation, clarity, and completeness applies equally to corporate sustainability reporting. Businesses should ensure their environmental claims are backed by data, explained in plain language, and cover the full scope of relevant impacts.
Training is another consideration. The ASG has recommended that advisers receive specific training on sustainability topics. Similarly, businesses should consider whether their teams have the skills needed to assess sustainability claims, manage environmental risks, and communicate environmental performance to stakeholders. SBS Academy training courses provide practical support for businesses developing internal sustainability capability.
Looking ahead, businesses should monitor further FCA guidance as it is published. The regulator has indicated it will continue to develop its sustainable finance framework. Consequently, additional clarity may emerge over the coming months. Businesses should also consider how they document their own sustainability practices, as standards for evidence and disclosure are likely to become more stringent across sectors.
Where to find authoritative guidance and updates
Businesses and advisers seeking further information should refer to the following authoritative sources. The FCA's policy statement on sustainability disclosure requirements sets out the detailed rules for investment labels and product naming. This document provides the regulatory foundation for the requirements now in force.
The FCA's finalised guidance on anti-greenwashing explains what firms must do to ensure sustainability claims are fair, clear, and not misleading. This guidance includes practical examples and sets out the regulator's expectations for substantiation and transparency. Advisers and businesses should review this guidance carefully to understand how the FCA assesses compliance.
For businesses managing carbon reporting and reduction plans, the government's Procurement Policy Note 06/21 remains the key reference for public sector supply chains. This note sets out the carbon reduction plan requirements that apply to contracts above £5 million per year. Businesses should ensure their plans meet these standards and are kept up to date.
The FCA's updates on sustainable finance provide regular information on new guidance, consultations, and policy developments. Businesses should monitor these updates to stay informed about regulatory changes that may affect their operations or their relationships with financial advisers.