Financial regulator asked to quantify cost to investors of its impending clampdown on the marketing of green investment funds
The country’s financial regulator has been asked to quantify the cost to investors of its impending clampdown on the marketing of green investment funds.
It has also been told to spell out the enforcement work it will be undertaking to identify investment companies guilty of ‘greenwashing’ – cynically labelling funds as green when they aren’t.
The requests, in a hard-hitting letter from the chair of the Commons Treasury Select Committee to the head of the Financial Conduct Authority, follow an investigation by The Mail on Sunday into the consequences of the FCA’s new rules.
Seven days ago, using analysis conducted by wealth manager SCM Direct, we estimated that the FCA’s shake-up of the green investment fund industry sector could cost investors more than £600million.
This bill will result from tens of thousands of investors moving their money out of green investments because the funds will no longer be allowed to be labelled as such. In the letter to FCA boss Nikhil Rathi, TSC chair Harriett Baldwin raised concerns that such transfer costs had not been included by the regulator in its proposals for harsher marshalling of green funds.
Finger on the pulse: We estimated that the FCA’s shake-up of the green investment fund industry sector could cost investors more than £600 million
She also sought assurances that the regulator would seek redress for investors who bought misleading green products.
Alan Miller, co-founder of SCM Direct, has welcomed the committee’s intervention. On Friday, he told the MoS: ‘It is a scandal that the FCA has failed in its legal requirement to conduct an analysis of the costs and benefits to investors of its proposed rules.
‘Baldwin’s letter also agrees with what we have been saying for years, namely that the FCA’s enforcement function is broken, resulting in no action against firms guilty of greenwashing.’
The FCA told the MoS it would ‘take appropriate, assertive and robust action’ against perpetrators of greenwashing.
But it failed to respond to two questions: the potential cost to consumers of its new rules and why it had not included such a number in its original proposals for reform of the £95 billion green investment fund industry.
Baldwin told the MoS: ‘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.’