Insurance firms must recognise that the risk of greenwashing can’t be confined to a single business function or activity, as they prepare to comply with the FCA’s anti-greenwashing rule, which comes into force on 31st May, says Hymans Robertson.
It warns that failing to do so could result in significant financial and time costs to rectify any errors, as well as possible sanctions from multiple regulators. Greenwashing risk is difficult to assess and manage effectively.
The leading pensions and financial consultancy advises that insurers should prepare thoroughly, as greenwashing is a focus for several UK regulators, including the Advertising Standards Authority. This likely means 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 must ensure that all sustainability claims are evidenced against these requirements.
Commenting on how insurers can manage their compliance with the FCA’s anti-greenwashing rule, Rebecca Macdonald, head of products at Hymans Robertson, said: “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 as ensuring 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 a view to creating 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.”
