An ESG analyst has called on financial advisers and investors to be careful when dealing with green bond investment opportunities, following a warning by ASIC.
Last week, the corporate regulator warned of scammers offering fake green bonds by representing themselves as well-known financial services firms.
ASIC has identified the existence of green bonds – which are used to finance new and existing projects that offer climate change and environmental benefits – that are not directly available to the general public or retail investors.
Speaking to InvestorDaily, Morningstar ESG analyst Erica Hall said advisers and investors should tread carefully as green bonds are in “high demand” by institutional investors.
“They are typically oversubscribed, often have tighter credit spreads than their non-green counterparts, investors pay a premium or a ‘greenium’ to purchase them. Further the demand in the secondary market remains high for these instruments, the premium can also increase further in secondary trading,” Ms Hall said.
“Given these are highly desirable instruments sought after by certain institutional investors, if an adviser or an investor receives an unsolicited approach for a green bond investment opportunity, that should immediately be treated with caution.”
Ms Hall added that prospective investors should always do their due diligence and be cautious of any “red flags”.
“Spelling mistakes, inconsistencies, returns that are too good to be true; prospective investors should contact the institution directly that is purporting to make the offer to clarify the legitimacy of the offer,” she said.
“If it’s too good to be true, it probably is.
“As always investors should seek financial advice if you have an adviser before acting.”
In March, ASIC alerted consumers to a rise in investment scams impersonating companies or financial investment firms.
The regulator warned that scammers often make contact through Gmail and Outlook email accounts and that their contact details do not match the information published on the legitimate company’s website.
Consumers are also being urged to be careful of receiving calls or messages “out of the blue” and that scammers may request remote access to their computer and/or contact them online, advising them about a “great investment opportunity”.
Prior to that, ASIC chair Joe Longo reported an “exponential increase” in scams.
“Over the past three years, scams have risen from 15 per cent to 35 per cent of all reports of misconduct made to ASIC, indicating that this is an increasingly significant issue for consumers,” Mr Longo said in March.
“With hundreds of millions lost per year to scams, government agencies have observed a rise in investment and other scams during the pandemic, while largely unregulated crypto assets are used increasingly to funnel money to scammers overseas.”
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