MPs are calling for the financial regulator to spell out whether victims of greenwashing will have to pay in order to rectify their investments.
The Financial Conduct Authority (FCA) is looking at introducing criteria that a UK investment fund must meet if it is to describe itself using terms such as “sustainable”, “environmental, social and governance”, “green” or similar. The move comes after some “sustainable” investments have been found to be funding oil and gas giants.
The Commons Treasury Sub-committee on Financial Services Regulations warns that consumers who currently invest in greenwashed funds may have to pay to move their investments elsewhere.
In recent correspondence with members of the sub-committee, the FCA assumed that one-third of funds currently claiming to be sustainable would no longer qualify for the label, while another third would decide not to use the term. In a letter to the FCA, the sub-committee expresses concerns that the watchdog has not put a figure on how much this will cost consumers and calls for a more detailed cost-benefit analysis of its proposals.
“Consumers who invested in funds believing they were doing their bit to save the planet must not be made to bear the cost of moving if they find out their fund isn’t so green after all,” said committee chair Harriett Baldwin. “Without a comprehensive cost-benefit analysis, the regulator’s proposals are lopsided. Further work on what the costs are going to be, who will pay and how the regulator will enforce the rules is clearly necessary.”
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