A raft of new financial products claim to be ‘green.’ The U.K. government isn’t so sure

June 9, 2021, 12:10 PM UTC

At a time when every company is making fast-tracked net-zero carbon emission claims and writing provisions in finer and finer print, the U.K. has launched a new independent research group to ensure “green” investments are what they say they are.

The new group—named the Green Technical Advisory Group—will combat the recent rise in “greenwashing,” which the government defines as “unsubstantiated or exaggerated claims that an investment is environmentally friendly.”

Hundreds of new sustainable investment funds are coming to the market each year in the U.K., and sales to domestic retail investors have tripled from 2019 to 2020. The British government is hoping the formation of the new group will help investors make better informed eco-friendly financial decisions.

The group will be chaired by the Green Finance Institute and will be made up of 18 stakeholders, which include members from FTSE Russel, Bloomberg, the Cambridge Institute, WWF, and others.

John Glen, the U.K.’s economic secretary to the treasury, noted that if the U.K. is serious about getting to net zero, “it’s crucial we have a clear common definition of what green means.”

He adds that “a U.K. green taxonomy will provide better data on the environmental impact of firms, supporting investors, businesses, and consumers to make green financial decisions and accelerating the transition to net zero.”

The EU has similar rules on defining greenwashing under the Sustainable Finance Disclosure Regulation, which imposed mandatory environmental, social, and governance (ESG) disclosure obligations for asset managers and other market participants. Upon Britain’s exit from the EU, experts warned the U.K. government intended to implement similar rules.

As part of the announcement, the government also noted it will be establishing an energy working group that will provide advice on new technologies to cut carbon emissions such as hydrogen and carbon capture, utilization, and storage. It will also address what nuclear power’s role is in the taxonomy, which, despite its polarizing reputation, emits very little carbon.

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