MPs criticise ‘lopsided’ plans to prevent investment funds from greenwashing

14th March 2023


The Financial Conduct Authority (FCA) must do more to tackle investment funds that have misled customers with exaggerated sustainability claims, and not punish victims, a cross-party group of MPs has said.

Under current proposals to tackle greenwashing, consumers who invest in funds found guilty of the practice may have to pay to move their investments into new sustainable funds.

However, the Treasury Sub-Committee on Financial Services Regulations is concerned that the FCA has not put a figure on how much this will cost, and has now called on the regulator to conduct a more detailed cost-benefit analysis.

The MPs have also asked the regulator what enforcement work it will be doing to tackle funds who have misled consumers following revelations that some ‘sustainable’ investments have gone to oil and gas giants Shell and ExxonMobil.

“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 Harriett Baldwin, chair of the committee.

“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.”

The FCA is looking to introduce criteria that an investment fund would need to meet to describe itself as ‘sustainable’, ‘ESG’, ‘green’, or similar.

It assumes that around one-third of funds currently claiming to be sustainable would no longer qualify under its new criteria, and another third would decide not to use the label.

As a result, the Treasury Committee has also asked the regulator whether there is a risk that tighter regulations could drive funds away from ESG investing, or out of the UK, reducing consumer choice.

This comes after research by climate solutions provider South Pole last year found that a quarter of large companies have decided not to publicise their net-zero targets, which has raised fears that many are now greenhushing.

CEO, Renat Heuberger, said: “Businesses are increasingly backing up their targets with science-based emissions reductions milestones. But if a quarter aren't coming forward with details on what makes their target credible, could corporate greenhushing be spreading?

“The speed at which we are overshooting our planetary boundaries is mind-blowing. More than ever, we need the companies making progress on sustainability to inspire their peers to make a start. This is impossible if progress is happening in silence.”

Image credit: Shutterstock

Subscribe

Subscribe to IEMA's newsletters to receive timely articles, expert opinions, event announcements, and much more, directly in your inbox.


Transform articles

The time is now

Dr Julie Riggs issues a call to arms to tackle a modern-day human tragedy

15th March 2024

Read more

The UK’s new biodiversity net gain (BNG) requirements could create 15,000 hectares of woodlands, heath, grasslands, and wetlands and absorb 650,000 tonnes of carbon each year.

13th March 2024

Read more

Campaign group Wild Justice has accused the UK government of trying to relax pollution rules for housebuilders “through the backdoor”.

14th February 2024

Read more

Digital tracking, packaging data delays and new collections provide a waste focus for this edition’s environmental round-up by legislation expert Neil Howe

28th November 2023

Read more

Environmental crimes could result in prison sentences of up to 10 years and company fines of 5% of turnover under a proposed EU law agreed by the European parliament and council.

21st November 2023

Read more

Stuart McLachlan and Dean Sanders discuss their book: The Adventure of Sustainable Performance: Beyond ESG Compliance to Leadership in the New Era.

14th November 2023

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert

IEMA Cookie Notice

Clicking the ‘Accept all’ button means you are accepting analytics and third-party cookies. Our website uses necessary cookies which are required in order to make our website work. In addition to these, we use analytics and third-party cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click ‘Settings’. To learn more about cookies, how we use them on our website and how to change your cookie settings please view our cookie policy.

Manage cookie settings

Our use of cookies

You can learn more detailed information in our cookie policy.

Some cookies are essential, but non-essential cookies help us to improve the experience on our site by providing insights into how the site is being used. To maintain privacy management, this relies on cookie identifiers. Resetting or deleting your browser cookies will reset these preferences.

Essential cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website.

Analytics cookies

These cookies allow us to recognise and count the number of visitors to our website and to see how visitors move around our website when they are using it. This helps us to improve the way our website works.

Advertising cookies

These cookies allow us to tailor advertising to you based on your interests. If you do not accept these cookies, you will still see adverts, but these will be more generic.

Save and close