The majority of people who see themselves as ‘green’ savers and investors have money in banks that are funding fossil fuels, a new study shows.
The research by Triodos Bank reveals the extent to which greenwashing – when a provider makes inflated claims about sustainability – is influencing well-intentioned consumers’ decisions to open ISAs.
Ahead of the tax year deadline, when many people will be choosing new ISAs, Triodos – a Good With Money ‘Good Egg’ firm – matched consumer polling with independent ratings of financial providers from Ethical Consumer magazine.
Providers of cash savings and stocks and shares ISAs are analysed by Ethical Consumer on a number of environmental issues, including those that invest in harmful sectors such as fossil fuel extraction or deforestation, with each provider given a rating from ‘best’ to ‘worst’.
The worrying influence of greenwashing
The analysis shows that 55 per cent of people with a stocks and shares ISA from a provider classified as ‘worst’ in Ethical Consumer’s ratings incorrectly think that their money is in a ‘green’ ISA.
And 52 per cent of investors who were influenced to choose their ISA based on its sustainability credentials actually have their money with providers classed as ‘worst’ for their environmental impact. This highlights the worrying role of greenwashing in leading well-meaning consumers to mistakenly fund areas that are fuelling climate change and harming the planet.
Greenwashing also persists in savings accounts, as 50 per cent of cash ISA holders with a ‘worst’ provider think that their money is in a green ISA, and 44 per cent say they were influenced to choose their cash ISA based on these providers’ perceived sustainable credentials.
The findings are largely at odds with the environmental values of UK consumers. One in two people believe that banks should not be investing in fossil fuel expansion (47 per cent), rising to over half (57 per cent per cent) of 18–34 year olds. Half of consumers also don’t believe a fund or savings account can be classed as ‘sustainable’ if it includes fossil fuel companies – even it also invests in renewables (49 per cent).
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Consumers welcome new greenwashing rules
UK savers and investors are keenly aware of and cautious about greenwashing, as six in 10 consumers (59%) say they are concerned about this in the financial services industry.
Yet only 10 per cent of consumers are aware of upcoming new rules from the Financial Conduct Authority (FCA) that aim to improve the trust and transparency of sustainable financial products and minimise banks and financial providers misleading consumers through greenwashing.
That said, two-thirds of people (66 per cent) think that the new rules are needed and will be helpful to consumers, while over half (54 per cent) would be motivated to switch financial providers if they knew that their current bank had broken the anti-greenwashing rules, rising to 61 per cent of consumers aged 18-54.
Roger Hattam, Director of Retail Banking at Triodos Bank UK: “These findings demonstrate the worrying truth about how well-intentioned consumers are being misled about how their money is being invested. In an industry dominated by opaque sustainability marketing, we have long advocated for much higher transparency – which is why the upcoming FCA anti-greenwashing rules are so desperately needed.
“There are millions of consumers wanting their money to align with their values, but this is not yet matched with real industry commitment to clearly signpost what causes their money is actually supporting.”
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