Recently, a key milestone was passed with little or no fan-fare, however that is not to undermine its significance for firms across financial services. On 31 May 2025, the Financial Conduct Authority’s (FCA) anti-greenwashing rule became a year old – a year in which the FCA has begun to actively supervise its compliance. This short note provides an update on where we are now, and the key lessons from this activity.

Background

The rule was introduced as part of the UK’s broader Sustainable Disclosure Requirements (SDR) framework. Its aim is to ensure that sustainability-related claims made by financial firms are fair, clear, and not misleading helping to build trust among consumers and combat concerns of exaggerated or unsubstantiated environmental claims. From the outset, the rule has applied across the entire spectrum of UK financial services firms, regardless of size or sector. This includes banks, asset managers, investment firms, and insurers. Its broad scope is designed to promote a culture of transparency and accountability in how sustainability is communicated to clients and the market. It is also worth noting that while sustainability linked loans (SLLs) are typically governed by market-led principles (like those from the Loan Market Association (LMA)), the anti-greenwashing rule remains relevant in this context, particularly following the amendments discussed immediately below. The FCA has previously expressed concerns about the SLL market, particularly around greenwashing risks and the LMA updated the Sustainability-Linked Loan Principles earlier this year to help address these.

Earlier this year, the FCA issued Handbook Notice 127, updating the ESG sourcebook to clarify the anti-greenwashing rule. Most notably, it removed the hyperlink to the Glossary term for the word ‘communicates’ in ESG 4.3.1R(1)(a) and ESG 4.3.1R(1)(b). This amendment ensures that the word ‘communicates’ has a broader, natural meaning which will give proper effect to the rule as previously consulted on, as opposed to linking it specifically to financial promotions. The FCA took the view that this linkage had been to potentially narrow the application of the rule, which had not been the policy intention (i.e. which was that it should apply much more broadly to firms’ communications about products and services). Additionally, there has been confirmation that ESG 4.3.1R(1)(a) and ESG 4.3.1R(1) (b) are not intended to be read cumulatively. The FCA confirmed, paragraph ESG 4.3.1R(1) (a) will apply to communications that are not financial promotions and paragraph ESG 4.3.1R(2)(b) will apply to communications that are financial promotions.

Activity

The FCA has been actively monitoring firms for their compliance with the anti-greenwashing rule and the rule has been referred to in official communications particularly the February 2025 portfolio letter to the asset management and alternatives sector. There was also the announcement last year by the FCA of its first ESG-related enforcement investigation albeit that this appeared to relate to climate-related disclosures not greenwashing.

In parallel, the FCA continues to collaborate with both the Advertising Standards Authority (ASA) and the Competition and Markets Authority (CMA) to address misleading sustainability claims. Notably, the CMA has already taken enforcement action against several companies for potentially deceptive environmental claims. Following the enactment of the Digital Markets, Competition and Consumers Act 2024, the CMA now has the authority to impose fines of up to 10 per cent of global turnover for non-compliance, significantly increasing its enforcement leverage. The FCA and ASA also continue to coordinate efforts around tackling greenwashing. The ASA has, for example, taken action in several high-profile cases, setting a tone that may indicate how the FCA’s approach to enforcement could evolve.

So whilst there has so far been no ‘big’ announcement from the FCA as regards an enforcement action against a firm’s failure to comply with the anti-greenwashing rule it is clear that the rule remains on the regulator’s radar and it is probably only a matter of time before we see one. To avoid becoming the subject of that announcement firms can take a number of steps and these are set out below.

Governance

To remain compliant with the anti-greenwashing rule, firms should take a proactive and systematic approach to sustainability communications. This begins with ensuring that all environmental or sustainability-related claims are accurate, clear, consistent, and substantiated, enabling meaningful comparison and avoiding the risk of misleading consumers. These principles should be firmly embedded within the firm’s internal policies, operational frameworks, and governance structures. This includes implementing controls to oversee how sustainability claims are developed, approved, and used across various business functions.

In practice, firms should conduct regular reviews of marketing materials, public disclosures and client communications to ensure alignment with stated sustainability commitments. Product governance and approval processes should also integrate checks on the credibility and transparency of ESG-related claims. In essence, the verification process involves ensuring that any sustainability claim made by a firm is truthful, transparent, and can be backed up with evidence. The FCA guidance on the anti-greenwashing rule emphasizes the importance of firms being able to justify their claims and adapt their communications to suit their audience. In addition, firms subject to the Consumer Duty will need to consider its rules and in particular the FCA’s expectations under the anti-greenwashing rule for the retail market are consistent with the Duty. Firms should test their communications to check that that they are likely to be understood by customers and meet their information needs. Importantly, compliance must not be treated as a one-off exercise, instead ongoing monitoring, staff training, and clear lines of accountability should be established to respond to evolving regulatory expectations and to reinforce a culture of transparency and integrity in all ESG-related communications.

Materials

We have published numerous items to assist firms including:

How we can help

We have assisted firms with their compliance with the anti-greenwashing rule and this includes providing training, advising on internal compliance policies, providing health-check reviews of existing materials and providing briefings to the board.