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What’s Wrong with Carbon Credit Pension Plans?

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Carbon credits are a good option for the right kind of investor, but the vast majority of pension holders should not be thinking about putting money into them. Unfortunately, this is a fact that many customers who invested their pensions into carbon credits have found out to their cost. To make matters worse, many of them were victims of financial mis-selling.

Are you unsure what a carbon credit pension plan is, or what the issue is with investing in them? If so, here’s more information.

What is a Carbon Credit Pension Plan?

At the Kyoto Agreement in 1997, most of the countries taking part agreed to address climate change by tackling the production of carbon dioxide and greenhouse gases. One of the ideas to emerge from this was the carbon credit scheme. Here’s how it works.

In an ideal world, a tonne of carbon dioxide produced by a factory would be cancelled out by a nearby forest absorbing the carbon dioxide. If the forest was owned by the factory, this would make the business officially ‘carbon neutral’ – and it would meet the targets outlined in the Kyoto Agreement.

Sadly, this isn’t an ideal world, which is where the carbon credits were meant to help. Businesses could buy carbon credits from other, greener companies to offset their emissions, and thus operate in a more environmentally friendly way.

Investing in Carbon Credits

Carbon credits evolved into a complex trading system, where companies and investors alike could purchase and sell them. Then, as you might expect, some companies started selling the credits to retail investors, meaning ordinary people with funds to invest into an effective retirement plan. This is the wrong kind of investor for carbon credits and that, unfortunately, is where the problems started to arise. For instance, if any companies involved in the scheme went bust, the money invested into their carbon credits went with them. Sometimes the funds invested were quite substantial.

Were You Mis-Sold to?

If you invested in carbon credits, the main thing you’ll want to ascertain is whether or not you were mis-sold the investment. There are a few ways to tell, which include:

  • Lack of checks. Let’s speak openly here. When the carbon credit investments were made available, they offered big commissions for financial advisors; so naturally they were pushed hard. However, if your advisor was so keen to get you to sign up that they didn’t perform the necessary checks regarding your attitude to risk etc. then they’ve acted negligently. At the very least, you should have been asked to complete a comprehensive risk and suitability assessment.
  •  Not telling you they were unregulated? When you signed up, were you informed that the carbon credit investments were unregulated – which means they’re more likely to be mis-sold? This is crucial information; if your financial advisor failed to let you know, you’ve got grounds for complaint.
  • Not explaining what they were (or the risks involved). Make no mistake, the carbon credit investments were always regarded as high-risk. Your financial advisor should have explained this to you and detailed what that might mean in terms of future profit and loss.

Making a Claim

If you feel that you’ve been mis-sold a carbon credit investment, get in touch with Goodwin Barrett. It may be the case that you’re entitled to compensation; and if you are, we’ll make sure you receive it.

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