FCA moves to simplify climate related disclosures and tackle Greenwashing

The Financial Conduct Authority (“FCA”) has announced plans to simplify climate-related disclosures and curb greenwashing. With sustainable investment products and environmentally responsible branding on the rise, concerns remain that not all claims are genuine. The FCA aims to boost transparency so investors and consumers can distinguish between genuine sustainability efforts and misleading marketing.

What greenwashing means

Greenwashing is the exaggeration or misrepresentation of environmental credentials, and it is emerging as one of the most significant risks in today’s sustainability-driven marketplace. It can appear in many forms: a pension fund claiming net-zero alignment while still holding significant fossil fuel assets; an investment product marketed as “climate aware” without supporting data; or disclosures so dense that retail investors cannot tell genuine sustainable practises from green branding.

The consequences are serious: misleading claims erode investor trust and divert capital from projects that genuinely support net-zero. Regulators worldwide are responding. In 2023, U.S. asset manager DWS paid $19m to settle charges brought by the Securities and Exchange Commission over misleading sustainability claims. In the UK, the FCA has made greenwashing a priority. On 6 August 2025, it announced plans to simplify climate disclosure rules, following feedback that existing requirements are too complex. Its message is clear: sustainability reporting must be both credible and accessible.

Why the FCA is acting now

The FCA’s review of its climate disclosure framework highlighted several challenges that require addressing:

• Complexity for retail investors: Whilst institutional investors benefit from detailed climate data, the reports produced at product level were often inaccessible to retail investors. This meant that the disclosures designed to increase transparency risked creating confusion.
• Data difficulties: Firms reported that it was easier to provide backward-looking information, such as carbon emission from fossil fuels, but harder to produce forward-looking data, such as scenario analyses modelling the impact of climate change on portfolios.
• Overlap of regimes: Multiple frameworks – particularly the Task Force on Climate-related Financial Disclosures (TCFD) and the UK’s Sustainability Disclosure Requirements (SDR) created duplications and inefficiency.
• Inconsistent applications: Some firms went into great depth, while others produced limited disclosures making it difficult for investors to compare products on a like-for-like-basis.

The FCA concluded that if disclosure rules are to support informed investment decisions and guard against greenwashing, they must be clear, consistent and proportionate.

The FCA’s response 

The FCA has set out plans to simplify climate disclosure rules without reducing their effectiveness. Its objective is to make disclosures clear and more accessible for retail investors while still ensuring that institutional investors receive the level of detail they require. A key part of this initiative is aligning the UK’s framework with international standards, particularly those being developed by the International Sustainability Standards Board (ISSB) so that firms operating globally are not faced with conflicting requirements.

The FCA has updated its guidance on sustainability reporting under both the UK sustainability disclosure requirements (SDR) and the legacy TCFD framework, aiming to cut duplication and give firms greater clarity. It has emphasised the need for consistent climate data, particularly in respect of emissions and scenario analysis in order to enable meaningful comparisons for regulators and investors.

The FCA is seeking to sharpen its focus on credible, measurable, and investor friendly disclosures, ensuring that sustainability claims can withstand scrutiny and the risk of greenwashing is reduced.

The broader regulatory context:

The FCA’s reforms reflect a broader international trend. In the EU, fund managers face strict sustainability disclosure rules, while in the U.S., the Securities and Exchange Commission is cracking down on misleading green claims. The UK’s SDR framework introduced labels such as sustainable focus and sustainable improvers to give investors clarity. The FCA’s latest initiative builds on this, aligning SDR with TCFD reporting to improve consistency and ensure investors understand what underpins each product label.

What this means for firms

Climate disclosures must be accurate and easy to understand. With the FCA pushing its anti-greenwashing agenda, firms must act now to ensure their sustainability claims are credible.

Scenario analysis remains vital: even with simpler disclosure formats, firms need to demonstrate they can model climate related risks and opportunities in a forward-looking way. Product labelling is under scrutiny, and any sustainability claims in marketing materials, product names or investor reports must be backed by robust evidence.

In the short term, firms may face dual reporting under SDR and TCFD, but the FCA expects efficiency, consistency, and alignment with international standards.

Look ahead

The FCA’s move to simplify climate disclosure rules is a significant step against greenwashing. By streamlining reporting requirements and aligning with international standards, it aims to balance transparency with usability. The message to firms is clear: sustainability claims must be evidence-based, disclosures credible, and the complexity is not cover for ambiguity. Those that act early to strengthen governance and reporting will cut compliance risk and build investor trust.

Our Environmental team can advise and assist in navigating the legal landscape surrounding environmental reporting, policy and regulation. We provide legal support to assist our clients in meeting their disclosure obligations and assist in reviewing environmental plans and reports.

We also advise on legal risks associated with sustainability claims. We support clients in ensuring disclosures are accurate, substantiated and resilient to greenwashing challenges. Please get in touch with the authors or your usual Beale & Co contact if you would like to discuss any of these issues further.