The Next Mis-selling Scandal?19 Feb 2022 19:33
From The Times, February 19 2022:
This is what mis-selling looks like
“How we do business is as important as what we do,” says Noel Quinn, the HSBC boss.
The quote is on a main page of the bank’s website laying out its commitment to sustainable growth.
HSBC goes on to boast about how this means building strong relationships with investors and the wider communities it serves, and “taking into account the issues that matter to them”.
What matters to many UK customers at present is the bank’s policy of hitting small charities with new charges. They’ve spoken very loudly but the bank does not seem to be listening. What matters to others is its role in Hong Kong, where it seems to tolerate China’s treatment of dissidents and Uighur Muslims. Others care about its role as a big financer of fossil fuels despite pledges to phase out the financing of coal.
HSBC is a grotty bank and Quinn’s promises on sustainability are totally empty. What this usefully shows is the growing gulf between what companies, and particularly chief executives, like to boast about on sustainability and what they actually do. It comes hand in hand with a whopping rise in investments in environment, social and governance (ESG) funds, which also claim to do one thing but often do something entirely different.
Last week the rating agency Morningstar cut more than 1,200 funds worth about $1.2 trillion in total from its European sustainable investment list after it turned out they were not doing what they said.
Last year the City regulator warned the chief executives of investment houses that many applications to launch ESG funds were “poor quality”.
Add to this the fact that only a handful of fund managers actually tell you where and how they are investing all your money and, crucially for ESG, how they are forcing change, and you build a picture of how the finance sector has managed to turn something potentially good into something rotten.
Using HSBC as an example, what are fund managers actually doing to challenge Quinn about what could be considered to be flagrant breaches of its own policy? If you invest in a fund that holds HSBC you have a right to know, but fund managers are pushovers. There is zero accountability.
There is a term for this: greenwashing. But that is largely meaningless, so let’s call all this what it really is: mis-selling. If you buy an investment fund that claims to be ESG and is then found not to be, then you have been mis-sold.
If your ethical fund manager ignores, or fails even to question, companies about breaches of their own policies when they say they will, you may also have been mis-sold. If the benchmarks they use are meaningless, the targets too low, the marketing too woolly, you probably have a case too.
It won’t be long before the litigation firms catch on to this.
Greenwashing is a term no one really understands. We won’t have to worry about that for much longer, though — very soon we’ll be referring to ESG as just another investm
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