City watchdog launches crackdown on greenwashing

The City watchdog has launched a crackdown on so-called greenwashing because of fears that consumers are being misled when trying to invest their money responsibly.

The Financial Conduct Authority (FCA) is proposing a set of rules to govern how financial firms can use the terms ‘green’, ‘sustainable’ and ‘ESG’ (environmental, social and governance).

The number of funds and other products which market themselves using these words has increased, as they attempt to attract customers who want to be more environmentally friendly.

Misleading claims: The Financial Conduct Authority (FCA) is proposing a set of rules to govern how financial firms can use the terms ‘green’, ‘sustainable’ and ‘ESG’ 

But regulators around the world are concerned that many products are being ‘greenwashed’ – and don’t live up to claims. 

Goldman Sachs, HSBC and Bank Of New York Mellon have already faced probes – some of which have resulted in penalties.

Sacha Sadan, the FCA’s director of ESG, said: ‘Greenwashing misleads consumers and erodes trust in all ESG products.’

He added: ‘Consumers must be confident when products claim to be sustainable that they actually are.’

Becky O’Connor, of Interactive Investor, said: ‘The FCA’s measures should go a long way to restoring faith and eliminating exaggerated and downright misleading marketing of financial products.’