A new Treasury Committee report on the future of green finance has called on the government and the Financial Conduct Authority (FCA) to consider climate labelling for financial products to tackle “greenwashing”.

MPs on the Treasury Committee have called on the government and the FCA to launch a consultation on mandatory “green labels” for financial products with a rating system that can be widely understood by retail customers.

The report also calls on the Treasury to give the FCA more power to “tackle greenwashing” due to some funds and products being mislabelled as “sustainable” which the MPs said could mislead consumers.

The Treasury Committee report comes on the tails of the government releasing its net zero strategy. The government is also poised to publish a Net Zero Review from the Treasury which will assess the costs associated with this strategy and go into greater details on costs and methodology.

The report also urged the Treasury to reform default pension fund policies, noting that consumers should not have to switch out of their default pension funds in order to invest sustainably.

It also asked the FCA to launch a “green fintech challenges” initiatives to bring new solutions to the green finance market by tackling regulatory barriers holding back innovation.