Are green-themed funds all they’re cracked up to be?

Environmental, social and governance investing has been a source of huge growth for the asset management industry in recent years. It could soon become a source of big problems.

Industry insiders are starting to worry that some of the overly optimistic or misleading ESG claims that have been made in fund documents and marketing could trigger a mis-selling scandal similar to those in PPI, endowment mortgages or diesel cars.

“It’s a bit like history repeating itself,” says Fiona Huntriss, a partner at law firm Pallas Partners, who focuses on financial litigation and has worked on previous mis-selling cases. “Words are being used in a very vague way” by fund companies, she adds. “Inconsistency, omissions, lack of clarity — that’s prime territory for mis-selling claims.”