The FCA’s anti-greenwashing guidance – key takeaways

On 23 April 2024 the FCA published its finalised guidance (“Guidance”) on the anti-greenwashing rule (ESG Sourcebook 4.3.1R) ahead of the rule coming into force on 31 May 2024. This article recaps on what the anti-greenwashing rule entails and the key points to take away from the Guidance, including some examples. 

Recap – the anti-greenwashing rule

The anti-greenwashing rule is being introduced as part of the FCA’s sustainability disclosure requirements (“SDR”) regime. The rule requires FCA-authorised firms to ensure that their sustainability-related claims are fair, clear, and not misleading and they are consistent with the sustainability characteristics of the product or service. ‘Sustainability-related claims’ means claims made about the environmental or social characteristics of products and services. 

This will not be an unfamiliar concept to firms as requirements to ensure information is communicated to clients in a ‘fair, clear and not misleading’ manner have been in place for some time. The Guidance makes it clear that the anti-greenwashing rule is intended to complement and not override any other rules. However, it should provide the FCA with an explicit rule on which to challenge firms on their sustainability-related claims. 

The four ‘c’s for sustainability-related claims  

Sustainability references should be: 

  1. Correct and capable of being substantiated.

  2. Clear and presented in a way that can be understood.

  3. Complete – they should not omit or hide information and should consider the full life cycle of the product or service.

  4. Comparisons to other products or services are fair and meaningful.

We have provided a brief overview of each of these principles below alongside examples sourced from the Guidance. 

Correct and capable of being substantiated

Firms should make factually correct claims which ‘do not overstate or exaggerate a product or service’s sustainability or positive environmental and/or social impact.’ It is important that firms are able to evidence claims and regularly review claims to ensure that the evidence sitting behind them is still relevant. Where firms are relying on third parties for information used in claims, they should be critical in assessing when it’s appropriate to rely on third party data and research. Where evidence is specifically referred to in a claim, firms should consider making the evidence publicly available and easily accessible. 

Example 1

A firm makes a promotional statement that an investment fund is ‘fossil fuel free’. 
However, the terms and conditions explain that the investment fund includes 
investments in companies involved in the production, selling, and distribution of 
fossil fuels where the company’s revenue earned from those activities is below a 
certain threshold.
So, the companies within the investment fund are not ‘fossil fuel free’. This 
statement is not factually correct and is not capable of being substantiated, which 
makes the claim misleading.

Clear and presented in a way that can be understood

Claims about sustainability should be transparent and straightforward, and firms should consider aligning to the intended audience, especially when using technical language. Importantly, the use of broad terms or general statements may be construed as unclear and confusing. The Guidance also states that firms should be aware of the ‘overall impression a visual presentation of a claim can create’. This includes the use of images, logos and colours alongside the sustainability characteristics of a product. 

Example 4

A firm has a large image of a rainforest at the top of its webpage about its savings 
accounts, with an overlay of text that reads ‘Sustainable Savings’. The webpage 
includes its ‘Green Savings Account’ alongside a list of other savings accounts. Its 
‘Green Savings Account’ uses deposits to lend to companies to fund sustainable 
projects, while its other savings accounts do not.

In this case, the image of the rainforest on the savings account webpage coupled 
with the text that reads ‘Sustainable Savings’ may give its audience the impression that the firm will use deposits in all savings accounts to help create positive sustainability outcomes. If only the deposits in its ‘Green Savings Account’ are ringfenced to fund sustainable projects, the use of both words and images in this way is potentially misleading as it gives the impression that the bank uses deposits to finance sustainable projects through more of the savings accounts offered than it actually does

If the firm wishes to use a sustainability‑related image, they should use an 
image that is consistent with the sustainability characteristics of the product or 
service, and only use that image in relation to products and services with those 
characteristics. In this case, it should only use the image and text for the ‘Green 
Savings Account’, rather than all savings accounts.

‘Complete’ claims

Sustainability-related claims should not omit or hide information and firms should consider the full life cycle of the relevant product or service. Firms should not ‘cherry pick’ information and instead present claims in a balanced manner, not focussing solely on positive sustainability characteristics where other aspects of a product or service may not have the same impact. The Guidance calls this providing a ‘representative picture’ and this representative picture could include information about the firm itself.

The Guidance also adds that where claims are only true if certain conditions apply, this should be clearly stated. The recipient needs to be able to determine from the information available the veracity of the claim, so there’s an element of ‘truth, whole truth and nothing but the truth’ that needs to be applied.

Example 6

A commonly tracked benchmark claims to be ‘sustainable’, by excluding 
companies with ESG ratings ‘lower than 3’. The benchmark administrator does 
not specify what the rating aims to assess, for example, whether it assesses 
sustainability‑related risks or impact. It also does not specify the scale the rating 
uses, which could be 1‑10, and does not disclose the rationale for choosing an 
ESG score of 3 as the appropriate threshold. It could, in reality, not be a high bar, as standards may vary across markets.

The benchmark administrator does not give its audience complete information 
and so does not make it clear whether and how the benchmark is representing 
sustainable objectives. This could result in users and ultimately end‑investors 
being misled about the sustainability outcomes of the benchmark.

Comparisons to other products or services are fair and meaningful

Claims which compare sustainability characteristics should compare like with like and make clear how the comparisons are being made. For example, a claim could potentially be misleading where it is making market-wide comparisons but is in fact based on a narrow or ‘chosen’ sample. Firms should also be careful about the extent to which sustainability characteristics are highlighted when in reality the product or service is simply meeting a minimum standard of compliance with existing legal requirements. 

Example 8

A firm claims that by buying their investment bond, investors will ‘reduce emissions’ more than through buying other investment bonds on the market. However, the firm does not make it clear to its audience that this comparison refers only to Scope 1 emissions (as opposed to all emissions – Scope 1, 2 and 3) and was based on a limited sample at a particular date.

The firm has picked information that paints a better picture of its investment 
bond compared to others on the market. The claim does not make clear how the 
comparison is being made or its limitations. The firm should make the limitations 
of the comparative claim clear. In doing so, it should explain what is meant by 
Scope 1, 2 and 3 emissions, if this technical language is not widely understood by 
the intended audience, and the limitations of covering only Scope 1 emissions. It 
should clarify that the claim was based on a limited sample, explaining what the 
sample was and the date on which that sample was taken.


The FCA’s increasing scrutiny of sustainability related claims reflects a wider trend by regulators in the UK and financial regulators globally to tackle greenwashing. The FCA notes that feedback to the draft guidance was broadly positive, and firms will certainly welcome the additional examples and clarifications provided in the finalised guidance ahead of impending implementation. The examples show the FCA will be robust in setting standards for sustainability-related claims, including expecting continuous monitoring and clear explanations in financial promotions.

Freeths can advise on all aspects of the new SDR regime and more broadly, are experienced on advising on all legal frameworks underpinning environmental claims and managing greenwashing risk. Please contact the authors for further information. 

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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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