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LONDON (Reuters) - Nineteen companies selling carbon credits have been shut in the past 15 months for bilking investors out of 24 million pounds ($38.7 million), British regulators said on Wednesday, warning more firms were trying to sell carbon as a viable option for private investors.
The UK Insolvency Service said more than 1,500 investors had been ripped off by the firms, which target mainly the elderly with high pressure sales techniques and promises of hefty returns of more than 40 percent.
"Salesmen played on peoples' keenness to ‘do their bit' to save the environment while making an investment at the same time," the Service said in a statement.
The companies typically offer carbon offsets approved by the United Nations - a feature used to give the offering credibility - as well as those issued in the opaque and unregulated voluntary market. Each credit is equivalent to a reduction of one tonne of carbon dioxide and can be used to offset a company's carbon footprint.
The Insolvency Service, along with Britain's Financial Conduct Authority (FCA), cautioned inexperienced investors against buying carbon credits because the market is illiquid and sellers often massively inflate prices.
The Service said it had seen an increase in the number of companies selling carbon credits in the past year.
"This has coincided with a reduction in the number of companies involved in land banking scams as more people have become aware of the risks," it added, referring to the sale of plots of protected or undevelopable land on the basis that they will appreciate in value if built on.
British Consumer Minister Jo Swinson called the carbon credit scam "particularly contemptible" as it not only preyed on older people trying to maximize their savings, but also targeted their desire to make ethical investments.
"Instead, investors have been left out of pocket with (credits) that are either worthless or do not exist," she said.
The FCA in September released the findings of a survey of 125 carbon investors, showing not one had made any money from investing in the credits.
The watchdog said some 183 carbon firms have been put under investigation since 2011 and has listed many of them on its website.
City of London police have also arrested at least 17 people in the past year suspected of defrauding investors through the sale of carbon credits.
Editing by Anthony Barker and David Holmes