The Financial Sector Conduct Authority is tightening how financial institutions communicate sustainability, placing ESG disclosures and marketing squarely within existing conduct requirements.
In its FSCA Sustainable Finance Update Report 2026, published this week, the regulator signals a shift from high-level principles to practical implementation, particularly in how firms disclose, market, and report sustainability-related information.
At issue is the quality and consistency of ESG information. The FSCA notes that “complete, accurate, timely, and comparable information is essential for market integrity, investor protection, and efficient capital allocation”.
ESG claims now a conduct requirement
ESG refers to environmental, social, and governance considerations used by financial institutions to evaluate risk, performance, and sustainability.
For product providers, advisers, and distributors, the immediate impact is on retail-facing sustainability claims.
The FSCA is developing guidance to clarify how existing legislation applies when firms market ESG-linked products. This does not introduce new rules but reinforces current obligations. These include:
- Financial Advisory and Intermediary Services Act (informed advice and disclosures);
- Policyholder Protection Rules (advertising and disclosure);
- Collective Investment Schemes Control Act (misleading claims and product disclosure); and
- Conduct Standard for Banks.
Firms must ensure that sustainability-related statements – in marketing, advice, or product documentation – are factually correct, not misleading, and presented in plain language.
The FSCA warns that weak or inconsistent claims can “undermine confidence and increase the risk of greenwashing, social washing, and impact washing”.
Full lifecycle accountability
The guidance applies across the product lifecycle and customer journey, including:
- product design;
- marketing and advertising;
- advice;
- disclosures; and
- ongoing client communication.
This requires alignment between product, compliance, and distribution functions, where inconsistencies often arise.
Climate disclosure requirements on the way
At a corporate level, the FSCA is preparing to introduce sustainability disclosure requirements for large, listed entities, starting with climate reporting. These disclosures will align with International Sustainability Standards Board (ISSB) standards, including IFRS S1 and IFRS S2.
This will introduce more structured and comparable ESG data into the market, affecting asset managers, analysts, and institutional investors.
The FSCA notes that improved reporting “improves market integrity, comparability, price discovery, and capital allocation”.
Phased implementation
The rollout will begin with large, listed entities and expand over time.
The FSCA is co-ordinating with the Department of Trade, Industry, and Competition on a national ISSB adoption roadmap and engaging with exchanges to incorporate climate disclosure into listing requirements.
ESG data becomes a risk issue
The report highlights weaknesses across the sustainability information chain – from corporate disclosures to retail product claims.
Inconsistent metrics, complex terminology, and fragmented standards can mislead investors, distort capital allocation, and erode trust.
For financial institutions, ESG data is now a risk management issue, not just a reporting exercise.
What firms should prioritise
The FSCA’s update signals a shift towards enforceable disclosure standards.
Firms should:
- review ESG-related marketing and disclosures;
- ensure governance over sustainability claims;
- align product design with ESG positioning;
- strengthen data collection and validation; and
- prepare for ISSB-aligned disclosures.
Sustainability is moving into the core of conduct regulation, with direct implications for how financial institutions design products, communicate with clients, and report to the market.
