Interactive Investor

Investors ‘crying out’ for official green standards

3rd November 2021 10:48

Rebecca O'Connor from interactive investor

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interactive investor comments on FCA sustainable labelling discussion paper.

The FCA has today published a discussion paper on the sustainability labelling of investment products to make it easier for investors to “put Environmental, Social and Governance (ESG) matters at the heart of their investment decisions.”

Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “Normal investors who want to do their bit have been crying out for a trustworthy, official label and set of standards that will give them assurance an investment is genuinely green rather than greenwash.

“Without universally established definitions, investors won’t feel they can always trust something that comes with a green label to be truly planet-saving. Ratings systems exist and are useful but they often produce conflicting results, which just leads to further confusion. For example, some sustainable funds that are truly making a positive impact might not score very well according to some measures; while others with holdings that could even include fossil fuels might come out with a higher sustainability rating. This can be seriously off-putting for some investors, who might reasonably expect a fund with ‘sustainable’ in the title to exclude fossil fuels companies altogether.

“For those who really want to make sure their money is going to help the environment, the current guidance to go and ‘do your own research’ is deflating. There is way too much onus on individuals to make their own decision about whether an investment is green enough for them, which can be very difficult if you don’t have the time or the knowledge to understand the underlying holdings of a particular product.

“interactive investor has curated a list of ethical investments according to different styles of investing to help investors – the ACE 40 range, which stands for ‘Avoids, Considers and Embraces’, as well as an ethical long list. Among these lists are many funds with an environmental focus. The ‘Embraces’ category describes positive impact-style funds and trusts that are focused on meeting sustainability goals.

“This work by the FCA to produce a discussion paper is very welcome and we hope it will bring confidence to those investors who are enthusiastic about the prospect of investing in the change they want to see.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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