New research from Triodos Bank UK reveals the extent to which greenwashing is influencing consumers’ decisions to open ISAs, as well-intentioned savers and investors are unaware of their financial providers’ poor environmental standards.
Ahead of the April tax year refresh, when many consumers will be choosing new Individual Savings Accounts (ISAs), Triodos has released new analysis combining consumer polling with independent ratings of financial services providers from Ethical Consumer, the UK’s leading alternative consumer organisation.
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 analysis shows that the majority (55%) of people that have a stocks and shares ISA with a provider classified as ‘worst’ in Ethical Consumer’s ratings incorrectly think that their money is in a ‘green’ ISA.
Moreover, 52% of investors that were influenced to choose their ISA based on sustainability credentials actually have their money in providers classed as ‘worst’ for their environmental impact – suggesting the impact of greenwashing in leading well-intentioned consumers to providers that continue to fund areas that are fuelling climate change and harming the planet.
Greenwashing also persists in savings accounts, as 50% of cash ISA holders with a ‘worst’ provider think that their money is in a green ISA, and 44% say they were influenced to choose their cash ISA based on these providers’ perceived sustainable credentials.
Findings at odds with consumer values
These findings are largely at odds with the environmental values of UK consumers, as one in two people believe that banks should not be investing in fossil fuel expansion (47%), a figure that rises to the majority (57%) 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 those that also invest in renewables (49%).
Yet, despite this, the findings show a disconnect in public engagement with how banks are truly using people’s money. Despite valuing sustainability, the majority of savers and investors (55%) don’t know if their money is being used in an environmentally friendly way by their ISA provider.
Roger Hattam, Director of Retail Banking at Triodos Bank UK, commented: “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.
“As well as actively screening out negatives – such as never investing in fossil fuel companies – to truly invest in people and the planet, banks need to actively fund areas that are changing the world for the better. At Triodos, we have led this charge and set the standard for using our customers’ money to drive positive change, whether through funding renewable energy, nature conservation or community-run housing.”
Consumers welcome upcoming FCA changes
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% 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%) think that the new rules are needed and will be helpful to consumers, while over half (54%) would be motivated to switch financial providers if they knew that their current bank had broken the anti-greenwashing rules – a figure that rises to 61% of consumers aged 18-54.
The younger generations are also more likely to be sceptical of their financial providers’ sustainable claims, as over a third (36%) of 18-54 year olds think that their provider would be likely to fall foul of the rules – compared to just 10% of over 55s.
Ruairidh Fraser, Writer and Researcher at Ethical Consumer, said:”It’s good to see that public awareness around greenwashing is increasing, and savers are rightly sceptical about financial providers’ sustainability claims. This makes it all the more shocking that so many savers are still being wilfully misled by companies that continue to profit from environmentally destructive investments.
“It’s therefore crucial that consumers look beyond the ‘sustainable’ branding of a particular fund, and instead demand that providers withdraw fossil fuel investments from their whole portfolios. Triodos’ survey shows that ethical investing is not a niche concern. With improved transparency standards and anti-greenwashing regulation we can ensure that it becomes the norm.
“Triodos reliably sits at the top of our finance rankings, and is one of very few banks that holds our Best Buy status. With robust ethical lending criteria and detailed information online about all its loans, Triodos’s commitment to ethical lending and investment remains unrivalled in the sector.”
Triodos has been operating with a focus on sustainable finance for over 40 years, and has been recognised as ‘stand-out Best Buy’ for banking by Ethical Consumer magazine for its personal current accounts and savings accounts.
