FCA launches new measures to tackle ‘greenwash’ as green finance booms

The UK's Financial Conduct Authority (FCA) has unveiled a string of new measures designed to prevent issuers from 'greenwashing', covering challenges such as climate risk reporting and the accessibility of 'green' products such as mortgages.

FCA launches new measures to tackle ‘greenwash’ as green finance booms

The FCA said the statement 'will provide a foundation for its future work on climate change and green finance'. Image: FCA

In a statement published on Wednesday (16 October), the body vowed to consult on new rules to improve climate-related disclosures, so that more issuers are reporting in line with the Task Force on Climate-related Financial Disclosures (TCFD’s) recommendations.

Launched in December 2015 by Bank of England governor Mark Carney, the TCFD recommendations notably call on companies to include impacts of different scenarios – including the 2C pathway of the Paris Agreement – and what this would mean for businesses – in their financial reports.

The FCA’s statement additionally says that the body will “clarify” its expectations around consumer and business access to “green” financial products, such as loans and bonds. This exercise, the FCA claims, will help prevent customers from being misled, while helping issuers to ensure that “green” products account for a higher proportion of their overall portfolios – and that their products are truly “green”, rather than “greenwashing”.

Further key statement points include the publication of a new discussion paper setting out the “most significant barriers” to effective stewardship of the booming green finance market, in collaboration with the Financial Reporting Council (FRC); and the finalisation of rule changes which will require Independent Governance Committees (IGCs) to oversee and report on firms’ environmental, social and governance (ESG) and stewardship policies.

While growing at an exponential rate, the green finance market is still in its infancy and is, therefore, suffering from a lack of definition. What is considered “green” varies from investor to investor and from bank to bank, both in terms of business clientele and financial offerings from the sector.

But with a new wave of climate activism now taking hold across the UK and other developed nations, calls for finance giants to divest from high-carbon projects and “green” the majority of their products are mounting. Moreover, with many nations setting net-zero targets in line with the recommendations of the Intergovernmental Panel on Climate Change (IPCC), pressure is growing for policymakers to mandate unified definitions of “green” finance and introduce compulsory disclosures.

Kicking the green finance can down the road

In related news, the European Investment Bank (EIB) has postponed the meeting in which its lending policy will be updated until next month.

The meeting will be used to decide how the EIB will go about ending its multi-billion-euro financing for fossil fuel projects by the end of next year. It was due to take place this week, but has been delayed until 14 November after what the Bank called a “constructive debate”.

The debate, reports have claimed, largely regarded whether the Bank should take a “zero tolerance” approach to fossil fuels or continue to back gas. France, Spain and the UK have given their backing to the former option, while Germany, Poland and Italy believe gas should continue to receive EIB funding.

Another key sticking point of the debate is understood to have been whether the EIB could, or should, extend its 2020 cut-off point for fossil fuels. The Bank previously claimed that this date would be necessary to meeting the Paris Agreement’s more ambitious 1.5C trajectory – but some nations believe more time, and more support, is needed to end their coal reliance.

Green finance at edie’s Sustainability Leaders Forum

edie’s Sustainability Leaders Forum returns in 2020, as some of the biggest companies, individuals and organisations championing sustainability gather at the Business Design Centre on 4 & 5 February.

Green finance will be a key discussion point, with speakers including Green Finance Institute CEO Rhian Mari Thomas, M&G Investment’s head of responsible investment and ESG Anita McBain and Aviva Investors’ global head of governance Mirza Baig. 

Other keynote speakers at this flagship, multi-award-winning event features include Mary Robinson, former President of Ireland; Rebecca Marmot, Unilever CSO; Tom Szaky, TerraCycle CEO and Gilbert Ghostine, Firmenich CEO. For details and to register visit:https://event.edie.net/forum/

Sarah George

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