Practical Steps to Avoid Greenwashing (Handelsbanken)

Stuart Helmer

Solicitor and Advertising Specialist

This video explains the Financial Conduct Authority (FCA)’s new anti-greenwashing rule, effective from 31 May 2024. It covers what the rule requires from FCA authorised firms when making sustainability claims, outlines the four guiding principles, and highlights the legal and reputational risks of non-compliance.

Greenwashing

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Practical Steps to Avoid Greenwashing (Handelsbanken)

3 mins 5 secs

Key learning objectives:

Understand the FCA’s anti-greenwashing rule and its core requirements
Identify the key risks of making misleading sustainability claims

Overview:

As green claims become more common in marketing, the Financial Conduct Authority (FCA) has introduced a new anti-greenwashing rule to ensure that sustainability-related statements are fair, clear, and not misleading. Now part of the FCA’s Environmental, Social and Governance (ESG) Sourcebook, the rule applies to all FCA-authorised firms and is supported by detailed guidance. Non-compliance can lead to significant enforcement action, legal claims, and reputational damage.

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Summary

What is the FCA’s anti-greenwashing rule and what does it require?

The Financial Conduct Authority (FCA) introduced an anti-greenwashing rule as part of its Environmental, Social and Governance (ESG) Sourcebook, which came into effect on 31 May 2024. This rule applies to all FCA-authorised firms and requires that any references to the sustainability characteristics of a product or service must be consistent with the actual characteristics and must be fair, clear, and not misleading.

To support compliance, the FCA issued guidance based on four core principles: claims must be correct and substantiated, clear and understandable, complete without omitting important information, and fair in comparison with others. These align with broader advertising standards such as the CAP Codes and the Green Claims Code but are tailored specifically to financial services.

What are the risks of making misleading sustainability claims?

Breaching the anti-greenwashing rule poses serious consequences. The FCA can take disciplinary action, including fines, suspensions, restrictions, or prohibitions on the firm. This creates a significant enforcement risk that is unique to financial services in the sustainability space.

Firms may also face civil claims from consumers or investors who have suffered harm due to misleading claims. Other risks include complaints to the Financial Ombudsman Service, legal claims under section 138D of the Financial Services and Markets Act 2000, and challenges from competitors or NGOs. The rule may increasingly be used as a legal tool to push firms toward genuine alignment with sustainability goals.

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Stuart Helmer

Stuart Helmer, UK Head of Advertising and Marketing at CMS in London, has 20 years of experience in advertising compliance and disputes. He advises businesses on making advertising claims, including environmental claims, in compliance with English law and regulation. He leads multinational teams advising on these issues throughout Europe and beyond. Stuart also advises on advertising disputes, regulatory enquiries, and dealing with competitors with unfair or misleading advertising.

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