A key tenet of those who crafted Britain’s financial regulatory regime back in the 1980s declared: “Regulation cannot stop a fool losing his money, but it should stop an ordinary man from being made to look a fool.”

That’s proved a lofty ambition over the past quarter century, partly because a lot of people investing in financial assets seem to be very stupid indeed.

How else to explain the persistence of advertisements for carbon trading and related “green” investments with purported returns that quite simply beggar belief?

Investment chat rooms and bulletin boards seem to be littered with claims to be able to deliver annualised returns of anything between 20 and 500 per cent – all the while mitigating climate change, reducing emissions and generally saving the planet.

Common sense tells you that all these offers are simply invitations to lose money quickly. And yet these are not spam operations, dispatched by a Russian computer server, trying to “phish” your bank account. These offers come from seemingly well-established companies operating from the heart of the City of London.

Visit the websites of these firms and you will be treated to some splendid guff about how the near-collapse of the banking system has led investors to turn away from traditional assets and instead look to save humanity. You will find reams of information on every green issue imaginable, from global food shortages to protecting rainforests, along with a commitment that this company is here to meet your freshly altered investment needs.

Would you be taken in? Of course not. But a phone call to these companies’ offices invariably reveals a bustling sales operation, staffed by eager young men ready to help. So somebody’s being taken in. Probably many thousands of people, if we trace the evolution of such operations and use history as a guide.

Because carbon trading schemes, in their varying forms, as sold to retail investors are the new penny share bucket shops. Boiler rooms have gone green, but in a bad way.

What seems to have happened here is that as the authorities have slowly put the share scamsters out of business over the past decade or so, the same people have moved into areas where regulation is something of a grey area.

Here, in simple terms, is how it all works. Reply to one of these ads or answer a cold call and you will be offered the chance to invest in a voluntary emission reductions scheme (VER), one of two types of carbon credit, where the credits are created by doing something planet-saving, such as growing teak in the Amazon. Unfortunately, these are not “certified” emission reductions, which are the type of carbon credits that are actively and professionally traded by large corporations and even governments.

Invest in a VER and it is rather unlikely that you will be able to sell the resultant credit, and that assumes that the scheme is real in the first place. By definition, most of these opportunities involve investing your money in exotic locations. Retrieving your funds may prove difficult.

But the key point here, in terms of investor protection, is that in Britain carbon credits themselves do not fall within the remit of the Financial Services Authority. Carbon is like oil and other commodities – trading across the globe is not regulated. The FSA’s powers kick in if a carbon derivative is being peddled or if the mug punter is being encouraged into a collective investment vehicle. But the schemes we are talking about here are crafted to avoid such legislation and, inevitably, the sales brochures never go into detail on this front.

Should we bother about any of this? Or should fools be left to fail, financially?

The short answer has to be that the FSA needs to be empowered to close the whole racket down. Aside from the losses suffered by individuals, the reputational damage to the City is very real. Ordinary people are entitled to assume that a financial entity headquartered within the confines of the Square Mile has some legitimacy and answers to a regulator. That is not a foolish assumption.

There’s also the little matter of carbon credits themselves. If this market is to develop and mature, it needs to be seen to be clean.

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