The FCA recently confirmed its first ESG-related enforcement investigation and it appears likely from further information which has since emerged that the investigation concerns climate-related issues but not greenwashing.

The investigation was referenced by the FCA on 7 May 2024 in a letter from the FCA to the Chair of the Treasury Sub-Committee on Financial Services Regulations in response to a letter from the Sub-Committee regarding the FCA’s Consultation Paper CP24/2, which included proposals to ‘name and shame’ by announcing the opening of enforcement investigations into firms. In that letter, the FCA explained that in 2023/24 it had opened 11 investigations into regulated firms, 4 investigations into listed firms and 12 investigations into unregulated firms and that one of the 11 investigations into regulated firms was an ESG-related case. The letter stated that the issues of concern in that investigation had been a matter of supervisory focus with the firm for more than two years prior to the investigation being opened. The FCA also indicated that, under its proposals to announce investigations, the identity of the firm under investigation might be named subject to an assessment in accordance with its proposed ‘public interest’ test (although in this case the FCA has not done such an assessment and does not consider that the public interest would always weigh in favour of disclosure in such cases). 

More recently, ClientEarth, an environmental charity, has published on its website an update regarding an FCA response to a Freedom of Information Request indicating that the FCA has confirmed that its active enforcement case was opened in July 2023 and concerns climate-related issues but that the FCA has suggested that this investigation does not relate to “greenwashing”. No further information has been provided regarding the type of firm being investigated or the particular misconduct in question.

We have seen an increase in pressure on the FCA from activist organisations such as ClientEarth to scrutinise firms in relation to climate-related risks and to be more forthcoming in relation to ESG-related enforcement. For further information in this area, please see our recent financial services regulation ESG webinar series and our ESG hub with further knowledge materials.