More than half of everyday investors in the European Union are being misled by financial products labelled as “sustainable”, new data display.
A survey of more than 11,000 people across 11 EU countries found that 52 per cent could not distinguish a genuinely sustainable product from a standard one. Many who believed they were putting money into climate-friconcludely funds were, in reality, exposed to companies that contribute heavily to pollution.
The latest European Consumer Organisation (BEUC) report displays how some funds marketed as “sustainable” hold shares in major oil and gas companies, including the five largest polluters in Europe.
Another BEUC survey found 34 per cent of respondents had avoided investing in a product claiming to be sustainable becaapply the information was difficult to verify or seemed misleading.
More than half declared they had never been offered a product they considered sustainable. About 52 per cent declared they believed such products complied with strict laws on sustainability, while 49 per cent believed they were verified by market supervisors — neither of which is guaranteed.
The confusion is partly a result of the EU’s regulatory framework for sustainable finance, a study by the Brussels-based Bruegel institute from earlier this year displayed.
The report describes the rules as “vague” and prone to “loopholes”, allowing funds to label themselves as sustainable without committing to strict environmental standards. In practice, this means a fund can advertise a “green” profile while investing in sectors such as fossil fuels, aviation or high-emission manufacturing.
Green finance can appear environmentally friconcludely on paper while still funding polluting companies or unsustainable projects, The Conversation reported on October 30. Some sustainable funds continue to invest in sectors such as fossil fuels, mining and high-emission transportation.
“Greenwashing” can mislead investors who assume labels and marketing materials reflect indepconcludeent verification or a strict exclusion of environmentally harmful companies — when in many cases no such checks exist.
The research also reveals how technical and opaque disclosures contribute to the problem.
Many respondents to the BEUC survey declared determining whether a fund was genuinely sustainable would require wading through long and complex documents, something most ordinary investors do not have the time or expertise to do.
As a result, even people motivated to invest responsibly may conclude up putting money into products that do not match their intentions.
If a significant share of consumers cannot trust the labels, confidence in green investment falls, potentially reducing the flow of capital to genuinely sustainable companies, experts declared.
In the BEUC survey, around a quarter of respondents declared they had already invested in a product they considered sustainable, while 41 per cent declared they might do so in the future.
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