The practice of overstating the environmental benefits of an organization's products, services, operations, practices, or policies. Greenwashing also includes intentionally emphasizing environmentally friendly practices or aspirations to overshadow or mask a less environmentally friendly reality. Greenwashing claims can rise to the level of being false, misleading, or fraudulent, risking exposure to regulatory enforcement, civil liability, or shareholder action.

For financial products, greenwashing can create confusion among market participants regarding whether a promoted product meets the stated green or sustainability goals. To minimize greenwashing, industry groups have issued principles with which financial products must align to be marketed as a green or sustainable product.

These guidelines include the Green Bond Principles and Sustainability-Linked Bond Principles published by the International Capital Market Association and the Green Loan Principles and Sustainability-Linked Loan Principles published by several loan associations. The principles for the loan products are available in the Loan Syndications and Trading Association's Sustainable Lending Library. For more information on these principles, see:

Marketing and advertising claims that rise to the level of greenwashing, whether express or implied, carry the risk of scrutiny from the Federal Trade Commission (FTC) and state regulators as well as challenges from competitors. The FTC has established national standards for environmental marketing claims in its Guides for the Use of Environmental Marketing Claims (Green Guides) (16 C.F.R. §§ 260.1 to 260.17).

Although the Green Guides are not laws or administrative rules, they provide instruction on how the FTC evaluates environmental marketing claims and interprets its authority to regulate unfair or deceptive acts or practices when examining environmental marketing claims. For more information on the Green Guides and the FTC’s related enforcement activities, see Practice Note, Green Marketing in the US.

Shareholder suits alleging greenwashing by public companies often are brought as class actions under the Securities Act of 1933 and the Securities Exchange Act of 1934. These suits generally allege that the company's climate-related disclosures were materially false or misleading. The Securities and Exchange Commission (SEC) also utilizes the US Securities laws and related rules to bring greenwashing-related enforcement actions. States also target companies for greenwashing with suits alleging deceptive practices and false and misleading advertising or statements in violation of state laws. For more on climate-related litigation and enforcement actions, see ESG and Sustainability: Climate-Related Litigation and Enforcement Toolkit.