Peer-to-peer lenders are in support of introducing green labels on their products as part of efforts to help the UK economy reach net-zero carbon emissions by 2050.
The Treasury and the Financial Conduct Authority (FCA) are currently working on requirements for businesses and investment firms to disclose sustainability information using environment, social and governance (ESG) labels.
These could show how environmentally friendly certain products are and the level of carbon emissions in someone’s pension or investment portfolio.
It is unclear if this will include P2P lenders but the industry may make its own efforts to demonstrate the green credentials of its products and support investors who want to invest sustainably.
City superwoman Nicola Horlick, who heads up P2P business lender Money&Co, said she would support the introduction of green labels.
“I would be happy to do this,” she said.
“However, I don’t think that the majority of our investors would be influenced by how green the underlying borrower was. They are driven by the need for income.”
Read more: ESG trend presents opportunities for P2P
Crowd bonds platform Abundance already enables investors to fund renewable energy projects and has worked with councils to provide community municipal bonds that support renewable energy projects in a local area.
Its managing director Bruce Davis said standardised labels could help tackle “greenwashing,” where a product isn’t really as environmentally friendly as it is claimed to be, and would make platforms more transparent.
“There is a significant opportunity for both P2P and investment-based crowdfunding platforms to fund the transition to net-zero,” he said.
“The simplicity of the P2P model means that transparency is probably more important than labels or traffic lights, which are more applicable to the more complex offerings from investment funds.”
The use of green labels is also supported by Ablrate but its founder David Bradley-Ward warned that it must not create more costs for investors.
“Inevitably a third-party assessment will be needed and that cost will only be absorbed by the investor reducing returns or restricting access,” he said.
“I am for sustainability in the investment world but not at the cost of access for customers.”