Global regulators are being urged to stamp out greenwashing when it comes to environmental, social and governance (ESG) orientated investing.
Advisory firm the deVere Group is warning that efforts to tackle carbon emission and boost sustainable investing could be hampered by misleading environmental claims.
The Financial Conduct Authority (FCA) is currently seeking views on criteria to classify and label ESG investment products.
But Nigel Green, chief executive of the deVere Group, said joined-up thinking is needed globally.
He warned that greenwashing – where firms make misleading environmental claims about their products or investment – could damage the credibility needed to guarantee that inflows into ESG products are maintained
“COP26 has galvanised the ESG gold rush that has been taking place over the last year, as an increasing number of investors pursue profits with a purpose with sustainable investments,” he said.
“It’s the hottest investment megatrend and this is set to grow as global financial powerhouse companies are helping to unlock and mobilise the trillions of dollars of private finance that is urgently required to halt the worst effects of human-created global warming.
“However, to ensure that this flood of private money continues and is put to work in the right way, we now need global regulators to work together on an international framework of standards.”
Bruce Davis, managing director crowd bonds platform Abundance, has previously backed the use of green labels on products.
The platform already enables investors to fund local renewable energy projects through community municipal investments (CMI).
Its latest CMI with Islington Council, which launched earlier this month, is almost 50 per cent funded.