According to the report, MSCI had given Tesla a near-perfect score due to its emphasis on the low carbon produced and its clean technology while FTSE ranked it low as it only rated the emissions from its factories.
The report also said inaction from the City-watchdog had “allowed greenwashing to flourish” and Alan Miller, chief investment officer at SCM Direct said the ESG sector was akin to the “wild west” and accused the Financial Conduct Authority of being “asleep at the wheel”.
He added: “We are certain the average investor would be shocked by the composition of many ethical investment products which often have significant exposures to tobacco, alcohol and defence stocks, and plain vanilla UK government bonds.”
But a spokesperson from the FCA said the report failed to acknowledge its recently published work on green finance which, according to the regulator, demonstrated it was already tackling such issues.
The spokesperson added: "We require asset managers to be clear about their funds’ investment strategies and this includes clarity over any ethical investments they claim to make."
In a feedback statement published last month (October 16) the regulator said deterring greenwashing and ensuring consumers could assess if a product was genuinely green would remain an active area of focus in its “supervisory and policy work”.
It agreed with SCM’s assessment that the ‘sustainable’ label was applied to a very wide range of products, but acknowledged that assessing ESG was complex meaning there could be legitimate causes for differences in assessment.
Earlier this year advisers were warned to “look under the hood” of funds claiming to be sustainable at ‘headline’ level to note the potentially substantial differences in funds purporting to be ESG.
imogen.tew@ft.com
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