Blog: FCA, Greenwashing and the Housing Market


The latest proposal from the Financial Conduct Authority (FCA) aims to crack down on greenwashing with new measures, including sustainability labels for investment products and restrictions on how green terms such as “ESG”, “green” or “durable” can be used.

Greenwashing is an unsubstantiated claim that a product or service is environmentally friendly or has a greater positive impact than it actually is.

The FCA proposes to introduce sustainable investment product labels that will give consumers the confidence to choose the right products for them. There will be three categories – including one for products improving their durability over time – supported by objective criteria.

As part of this, it introduces restrictions on how certain durable expressions can be used. To help avoid misleading product marketing, the FCA will require companies to provide consumer-facing information to help them understand key sustainability-related features of an investment product.

As well as more detailed information, suitable for institutional investors or retail investors who want to know more.

This means that those in the housing and mortgage sectors offering green initiatives must meet specific criteria to ensure that their marketing and consumer-facing information is valid for customers.

FCA’s Environmental, Social and Governance Director, Saha Sadan, said: “Greenwashing misleads consumers and erodes trust in all environmental, social and governance (ESG) products. Consumers need to be confident when products claim to be more durable than they actually are. The rules we are proposing will help consumers and businesses build trust in this sector. This supports investment in solutions to some of the world’s biggest ESG challenges. This puts the UK at the forefront of sustainable investing internationally. We are raising the bar by setting strong regulatory standards to protect consumers in line with our broader FCA strategy. »

Why is our industry’s role in the road to net zero so important?

When looking at the issue of a greener future, many people point to cows or cars, when in fact the housing market is responsible, according to the Energy Savings Trust, for 21 % of UK carbon emissions.

This huge role we play means that we urgently need to look at how we can go green and do it quickly to meet the priorities and targets set at COP26.

We can no longer ignore the issues bubbling beneath, and it’s time to evolve green housing and green finance to make them more attractive, accessible and realistic for our customers.

In fact, many large suppliers are already committed to an environmental mission. Lloyds’ managing director of intermediaries, Esther Dijkstra, told us last year: “Our main objective is to go green. This could be helped in the coming years by an increase in initiatives for customers to make greener choices, such as the government’s renewable heating incentive for homeowners to reduce our carbon emissions.

The future is likely to see an increase in the number of environmentally conscious buyers as more and more customers want a green mortgage and greener finances. But we have to make sure that we have those opportunities for customers and that they are balanced with the latest FCA requirements.

What the FCA proposals mean for the housing and mortgage sectors

It is encouraging to see the FCA proposing new rules to tackle greenwashing in financial services, as it can be used as a driver towards stronger and more sustainable mortgage deals.

Although organically with a greener future in mind, the mortgage market has already made positive progress towards a greener future and overcome a national and international challenge. It is essential that the latest FCA measures continue to propel change and the right outcome for customers without revolving around profits alone.

The customer must come first, and they cannot be disappointed or disengaged from the importance of what we are all trying to accomplish. For mortgages to play their part, comply with FCA regulations and be efficient for customers, mortgage providers must continue to put the customer first. This is seen in offering better rates compared to other mortgage products.

While it is of course necessary to regulate claims and it is vital that companies can back up their offerings, it is essential that FCA policy does not over-regulate and delay the most important innovation. Innovative ideas from the sector can lead to the growth of a green housing market and enable us all to move towards a net zero future, so getting the balance right is vital.

James Tucker is the Managing Director of Twenty7Tec

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