The UK Treasury Committee has called for tougher regulations to prevent misleading or false environmental claims, known as greenwashing, in financial products.
The Financial Conduct Authority (FCA) should have the appropriate remit, powers, and priorities to enforce stronger controls, MPs said.
READ: ESG investing: how to spot greenwashing
Financial products should be clearly labelled to allow consumers to assess their relative impact on the climate and to make choices accordingly.
The Treasury and the FCA should consult on making such green labels mandatory, including how they could encourage innovation and be widely understood by retail consumers, the Committee said.
The FCA should consider further FinTech challenges, which it launched in 2018 to develop innovate products and services to assist the transition to a greener economy, to encourage innovation.
The regulator should also set out how it will tackle remaining regulatory barriers that discourage innovate green financial products from coming to market, it added.
“The Government, private finance, consumers, and regulators all have vital roles to play in helping the UK to achieve net-zero carbon emissions by 2050,” said Mel Stride MP, Chair of the Treasury Committee.
“The UK is a global leader in financial services. When the world’s eyes are on us for COP26, we must show that we can also be a green finance powerhouse to help achieve net-zero.”