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Download briefingBackground
Fossil LNG is increasingly promoted as a “sustainable” transitional maritime fuel to support shipping decarbonisation. However, this narrative is at odds with a growing body of evidence demonstrating its significant climate impacts, particularly due to methane emissions across its lifecycle.
At the same time, substantial finance flows continue to be directed into LNG-powered vessels, bunkering facilities, LNG carriers and other related infrastructure. Problematically, in some cases, these investments may be accompanied by sustainability claims. These claims risk overstating fossil LNG’s environmental performance and omitting important context regarding the fuel’s lifecycle emissions.
Regulators are now taking an increasingly stricter approach to environmental marketing and communications. In the UK, developments across consumer protection law and financial regulation signal clear limits on how fossil LNG can be presented as “sustainable”, with direct implications for investor communications and financial products.
The scale of the problem
- Shipping accounts for around 3% of global GHG emissions, with emissions rising.
- USD 127bn in maritime LNG financing is linked to just 10 major banks.
- Methane emissions from LNG-fuelled ships caused an estimated USD 950m in annual climate damages in 2023.
What’s covered in the briefing?
- Rising legal risk of greenwashing: Why unqualified claims about fossil LNG being a “sustainable” maritime fuel may breach UK regulation.
- Regulatory developments in business-to-consumer advertising: Lessons for the finance sector from the Advertising Standards Authority‘s rulings against LNG greenwashing.
- Financial sector obligations: How the Financial Conduct Authority’s anti-greenwashing rule and sustainability labelling regime apply to LNG-related investments.
- Investor communications risk: The growing risk of shareholder claims under the Financial Services and Markets Act 2000 for misleading statements or omissions.
Recommendations
To reduce the legal risks associated with misleading claims in the finance sector:
- Claims about fossil LNG in fund materials, reports, prospectuses and other published materials should be reviewed and updated where necessary. This would ensure that the environmental and climate impacts of fossil LNG are transparently and accurately described and reflect the full lifecycle impacts of fossil LNG.
- Strict verification and governance should be implemented, such that any fossil LNG-related disclosures are evidence-based and aligned with the best available science.
Dominika Leitane says:
“Recent legal and regulatory developments make it clear that fossil LNG can no longer be presented as a ‘clean’ or ‘sustainable’ solution to decarbonising shipping, and any statements about the environmental impacts of fossil LNG must be accompanied by robust, lifecycle-based scientific evidence.
The legal risks arising from misrepresenting fossil LNG are no longer theoretical. Regulators are already acting, and the legal frameworks are in place for increasingly stringent enforcement. Financial market actors that continue to overstate the environmental benefits of fossil LNG, or fail to disclose its full climate impacts, expose themselves not only to reputational harm but to potential legal, regulatory and financial consequences.
The direction of travel is clear: transparency and accuracy must underpin all sustainability claims.”
