Navigating Greenwashing risk across jurisdictions

Explore how greenwashing regulation, litigation and disclosure requirements are shaping risk for insurers and policyholders.

Greenwashing has moved from the margins of environmental debate to the centre of regulatory, reputational and litigation risk. For insurers, greenwashing has two dimensions: they must police their own sustainability-related communications while also assessing the exposures of their policyholders. As regulators, consumers and investors step up scrutiny across markets, insurers face a growing challenge in understanding where greenwashing risk may emerge - and how quickly it can become a claims issue.

What greenwashing means

There is no single global definition of “greenwashing”. In broad terms, it describes claims - or omissions - that make a company’s products, services, processes, brands or operations appear less harmful, or more beneficial, to the environment than they really are. The term has become more nuanced as regulators have turned their attention to particular sectors. In financial services, for example, the UK Financial Conduct Authority has identified a form of greenwashing relevant to banks, fund managers, insurers and other providers.

Related concepts have also entered the debate, including “greenlighting”, where a business highlights selected green credentials while downplaying less environmentally friendly practices, and “greenhushing”, where companies avoid publicising their sustainability achievements because of political or reputational pressure.

Regulators are moving, but not in step

Although the rules aimed at tackling greenwashing have multiplied around the world, the problem for multi-national businesses is that the regulatory map remains fragmented. There is still no single framework capable of giving global firms one set of standards to follow.

• European Union

In the European Union, the Empowering Consumers for the Green Transition Directive will apply to Member States from 27 September 2026. The Directive is designed to strengthen consumer protection against greenwashing, early obsolescence and misleading sustainability claims. It prohibits green claims that lack specific and verifiable evidence, carbon-neutral claims based solely on offsetting, and self-declared sustainability labels without independent certification. It also expands the list of commercial practices that are deemed unfair in all circumstances across the EU market.

The Corporate Sustainability Reporting Directive adds another layer. In-scope companies must disclose sustainability information, including the risks and opportunities they identify from social and environmental issues and the impact of their activities on people and the environment. Those disclosures must be detailed, comparable, verifiable and subject to assurance under the European Sustainability Reporting Standards.

• United Kingdom

In the United Kingdom, the Digital Markets, Competition & Consumers Act 2024 has applied to commercial practices since 6 April 2025. It targets misleading actions, omissions and failures of professional diligence in business-to-consumer practices. The Competition and Markets Authority can enforce the Act directly, including through civil penalties of up to 10% of global turnover and fines of up to £300,000 per infringement. Businesses are also guided by the CMA’s Green Claims Code, while the CAP and BCAP Codes set standards for advertisers.

Financial services firms face additional scrutiny. The FCA’s anti-greenwashing rule has applied to all FCA-authorised firms since May 2024. It requires sustainability-related statements about financial products or services, whether addressed to professional or retail clients, to be consistent with the product or service and to be clear, fair and not misleading.

• United States

In the United States, the Federal Trade Commission’s Green Guides have been in place since 1992 and were last revised in 2012. They sit alongside the FTC’s powers under Section 5 of the FTC Act to prohibit deceptive acts or practices affecting commerce. The Guides warn against overstating environmental attributes, omitting material information, using broad or vague language, and making claims without reasonable substantiation. They do not, however, have the force of law. The FTC may issue warning letters or seek cease-and-desist orders, but civil court action is taken only in response to a separate breach of state or federal law.

What insurers need to watch

For insurers, the practical question is: how to assess greenwashing risk when rules differ so sharply between markets?

The answer is complicated by diverging political and regulatory trends. While new federal greenwashing rules appear unlikely in the United States under the current presidential administration, the United Kingdom, the European Union and states such as California are expanding disclosure obligations. At the same time, private actors - from individual consumers to state attorneys general - continue to scrutinise companies accused of overstating their environmental credentials. Almost all litigation surveys point to a rising number of private claims against corporations over alleged greenwashing.

Insurers therefore face direct exposure from their own conduct. They need to track fast-moving rules in each jurisdiction where they operate and ensure that internal and external communications, including marketing materials, comply with applicable standards. Failure to do so may lead to regulatory sanctions, to reputational damage and potential impact on share value.

The underwriting implications may be just as significant. As greenwashing litigation targets corporate commitments, environmental claims and sustainability disclosures, insured companies may face a broader range of claims. That could translate into exposure under commercial general liability policies, for example where sustainability seals are misused or toxic tort allegations arise; under D&O policies, where government investigations are involved; or under E&O policies, where advisers or public relations firms are accused of misrepresenting sustainability campaigns.

Politics changes the pace, not the risk

Political developments can affect the speed and direction of ESG regulation, but they do not necessarily remove the underlying risk of claims or scrutiny. The United States illustrates the point. The 2025 change in presidential administration led to the reversal of policies that would have tightened greenwashing regulation, and FTC warning letters relating to the Green Guides appear to have declined as the agency has focused on other deceptive practices. Yet private consumer litigation, state actions and municipal claims continue to keep the issue alive. For insurers serving global clients, the practical lesson may be to benchmark against the strictest applicable jurisdiction. A product that satisfies UK standards may also satisfy less stringent US federal requirements, but the reverse will not always be true.

Conclusion

Greenwashing is no longer a niche compliance concern. It is an evolving source of regulatory, litigation and reputational risk for insurers and their policyholders alike. Although approaches differ between jurisdictions, the direction of travel is clear: sustainability-related claims are being tested more closely, and businesses are expected to support them with evidence. For insurers, continued monitoring of regulation, litigation and market practice will be essential as the risk profile develops.