The Treasury Committee calls for the financial regulator to spell
out whether victims of greenwashing will have to pay to move
investments to funds properly labelled as ‘sustainable’.
The Financial Conduct Authority (FCA) is looking to introduce
criteria that a UK investment fund would need to meet to describe
itself as ‘sustainable’, ‘ESG’, ‘green’ or similar.
ESG (short for Environmental, Social and Governance) is a way of
considering a business’s impact on society and the environment,
and how transparent and accountable it is.
Following revelations that some ‘sustainable’ investments had
invested in oil and gas giants Shell and ExxonMobil, funds were
accused of greenwashing.
The Treasury Sub-Committee on Financial Services Regulations,
which scrutinises regulatory proposals, warns that consumers who
currently invest in funds guilty of greenwashing may have to pay
to move their investments into new ‘sustainable’ funds.
The cross-party Committee of MPs is concerned that the FCA has
not put a figure on how much this will cost consumers, and calls
on the regulator to conduct a more detailed cost benefit analysis
of its proposals.
The Sub-Committee is concerned that the regulator will not be
seeking redress for customers who have been sold misleading
investments. The MPs ask the regulator what enforcement work it
will be doing to tackle funds who have misled consumers.
The MPs also ask if there is a risk that tighter regulations
could drive funds away from ESG investing or out of the UK,
reducing consumer choice.
Commenting on the correspondence, , Chair of the Treasury
Committee, said:
“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.
“Without a comprehensive cost-benefit analysis, the regulator’s
proposals are lop-sided. Further work on what the costs are going
to be, who will pay, and how the regulator will enforce the rules
is clearly necessary.”
The correspondence follows an evidence session in
which industry representatives and the FCA were asked their views
on the proposals.
In recent correspondence
to the Committee, the FCA assumed that one third of funds
currently claiming to be sustainable would no longer qualify for
a sustainable label, and another third would decide not to use
the label.
