Why FinTechs need to be aware of the Green Claims Code

As the shift to become more environmentally conscious and sustainable takes hold at every level of society, businesses globally are realising the importance of making a more firm and honest approach to making their organisations more sustainable.

With more people than ever concerned about their environmental footprint, the Competition and Markets Authority (CMA) has developed the Green Claims Code – a new claims system which seeks to prove whether an organisation truly walks-the-walk when it comes to sustainability.

The Green Claims Code sets out six key points to help check whether a businesses’ environmental claims are genuinely green. Green claims – also sometimes called environmental claims – are claims that show how a product, brand or business provides an environmental benefit. This can be translated through statements, logos, symbols, graphics and brand names.

Coming into effect from January 2022, the Green Claims Code will come at a vital time for consumers who are looking to ensure they are lowering their carbon footprint and are not being misled. This latter point is a key issue identified by the CMA, after a global review by the organisation in January 2021 of randomly selected websites found 40% of green claims made online could be misleading consumers.

How this will impact FinTechs

With ESG reporting rapidly climbing in importance at many financial institutions, the new Code will also beef up this area. The Code will require financial organisations’ environmental statements to be factual and accurate, be fair and meaningful, avoid ambiguity or vague language, not seek to cover up information of importance, take into account a product or service’s full life cycle and be evidenced.

This provides not just large financial institutions but also FinTechs with much consideration to be made on the topic of sound environmental reporting. One considerable area is that of using clear and concise language – with the Code’s requirement now meaning the need to use language free of overcomplexity and jargon in environmental statements has become more important than ever.

Another key part of the code for FinTechs is the need for statements to take into account the bigger picture, not just a small aspect of a company’s activities. For example, if a FinTech is flouting itself as being green due to a new sustainable finance product launch or partnership – it must ensure within its other operations that it is staying true to its message by not having connections to unsustainable services and methods – a key example of greenwashing and potentially covering up information of importance.

In the industry currently, there are growing efforts by institutions to make themselves bulletproof in this area. In December 2021, the Hong Kong Securities and Futures Commission revealed it is looking to adopt global ESG standards to prevent cases of greenwashing.

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