City watchdogs launch crackdown on greenwashing amid fears consumers are being misled

The city’s watchdog has launched a crackdown on so-called greenwashing amid concerns that consumers are being misled into trying to invest their money responsibly.

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

The number of funds and other products that market themselves using these words has increased as they try 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 “skimmed” and not compliant.

Goldman Sachs, HSBC and Bank Of New York Mellon have already faced investigations, some of which have resulted in fines.

Sasha Sadan, the FCA’s director of ESG, said: “Greenwashing misleads consumers and undermines confidence in all ESG products.”

He added: “Consumers need to be confident that products that claim to be sustainable are.”

Becky O’Connor of Interactive Investor said: “The FCA’s action should go a long way towards restoring faith and eliminating exaggerated and simply deceptive marketing of financial products.”