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Greenwashing: Mis-sold Ethical Investments

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In these environmentally-aware times, increasing numbers of people are keen to invest in sustainable products. However, doubt has been cast over just how eco-friendly or ethical these investment products actually are. In fact, it’s become such an issue that the FCA have promised to tackle the problem head-on.

Greenwashing – what is it?

Greenwashing as a term has been around for decades. In the 1980s, it was used to describe corporations making over-the-top claims about their environmental credentials. Nowadays, it’s taken on a more specific meaning in the world of investment.

It refers to the process of presenting certain products as more ecological, sustainable or ethical than they actually are. Some unscrupulous financial advisors are cashing in on the heightened focus on the environment; encouraging eco-minded customers to invest in products that aren’t as green as they seem.

The damaging impact of greenwashing

Greenwashing is not only misleading for the consumer; it can also be regarded as mis-selling. Any information that customers receive that’s inaccurate or poorly explained is considered bad practice by the FCA, and this falls under that category.

However, greenwashing also has wider implications. These practices could reduce confidence in green products, which would mean less people investing. Without investment, genuinely sustainable sectors may struggle more – at a time when they really should be leading the way.

Examples of mis-sold ethical / ecological investments

It’s widely acknowledged that, until recently, the ESG (environmental, social and corporate governance) sector was under-regulated. This gave some firms the chance to make inaccurate claims about the green credentials of their investment products, without any risk of detection.

The situation looks like it’s starting to change, though. For example, Fidelity International (one the globe’s largest hedge fund managers) recently launched an investigation, after accusations were levelled at them for presenting certain funds as ‘socially responsible’, when in fact, they weren’t.

Likewise, funds such as Vanguard SRI products and L&G Future World were found to be not as ‘green’ as they were presented to be – with exposure to sectors like defence, tobacco, and gambling.

What’s the FCA doing about it?

The FCA have declared that they will address the growing issue, in a bid to protect investors and to support the green sector.

A spokesperson for the regulator highlighted that the assessment of some investment products was ‘complex’, with “legitimate causes for differences in assessments of sustainability of products.” However, the main focus will be on making sure that consumers are not mis-sold products, or misled about the nature of what they’re investing in.

Have you been mis-sold to?

Here are some signs that you might have been mis-sold to:

  • Your investor didn’t properly explain the ESG rating of your product.
  • They didn’t explain exactly what sectors your investment product was exposed to.
  • They simply labelled it as ‘green’ or ‘sustainable’ without explaining exactly what that meant.

If you’re concerned that you’ve been a victim of mis-selling, help is at hand. Call Goodwin Barrett’s team on 0808 163 1659 or email enquiries@goodwinbarrett.co.uk to discuss your experiences and find out if you’re in a position to claim compensation.

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