Sustainable investing needs stricter standards in place or greenwashing will continue to rise, the newly appointed City minister warned today.
In his first speech since being appointed on 8th July following the resignation of John Glen, Richard Fuller said the UK was moving to clampdown on firms abusing the environmental, social and governance (ESG) label to cover the impact of their operations.
“Greenwashing is a form of consumer mis-selling. Simple as that. But unfortunately, it is becoming more prevalent around the world,” he told the Finance for Impact conference.
“Investors rightly care and we’re seeing an increase in regulatory attention to greenwashing in other countries such as Germany and the United States. The UK for its part is taking action to ensure the market for sustainable finance is well regulated.”
He added that “open, honest and impartial information” was needed to ensure that firms and consumers could benefit from new opportunities in sustainable investment, but warned that current data is often still “inconsistent or inaccurate”.
The ESG sector has ballooned in recent years as investors look to put their cash to good use. The industry is set to grow to manage $50tn assets under management by 2025 at just half the pace of the past five years, according to a recent report by Bloomberg Intelligence
But Fuller’s comments come as policymakers and City firms gathered at Mansion House today to discuss greater scrutiny of the ‘social’ factor of ESG investment amid fears that the label is being misused by investors.
Ministers and regulators have ramped up their rhetoric on the clampdown on the abuse of ESG investments in recent weeks. Pensions minister Guy Opperman on Friday told City A.M. that he would head up a new taskforce to hold pension fund managers to account on ‘social’ investment.
While the environmental and governance aspects of ESG have seen strong take up by pension funds, Opperman said that ‘social’ factors still lacked enough standardisation and clarity to be practical for investors and as a result had been neglected.
The FCA has also recently backed calls to bring ESG data and standards within its regulatory remit, saying that was a “clear rationale” for greater regulatory oversight.
The UK’s top watchdog is looking to draw up regulation to standardise the UK’s approach to ESG with wider global