European regulators need to crack down on ‘sustainable’ funds that are continuing to invest in fossil fuel companies, according to Reclaim Finance.
The non-profit flagged research by Follow the Money that found nearly half of the 838 European funds – home to some €620bn in assets – classified as Article 9 under the Sustainable Finance Disclosure Regulation (SFDR) have exposure to aviation or fossil fuels.
This is despite the criteria for Article 9 stating funds must have “sustainable investment as its objective” and EU financial regulators reminding fund providers last year that Article 9 funds “may invest in a wide range of underlying assets, provided these underlying assets qualify as ‘sustainable investments”.
The research found TotalEnergies, the world’s seventh largest developer of oil and gas production projects, is held in both Amundi’s and BNP Paribas Asset Management’s “sustainable” funds. Meanwhile, the Japanese company Marubeni, which plans to build up to 1,300 MW of new coal-fired power generation capacity, is included in BlackRock and Amundi funds.
See also: – Eurosif says fragmented SFDR risks allegations of mis-selling
Lara Cuvelier, investment campaigner at Reclaim Finance, said: “This investigation confirms that a large greenwashing market has been created, with asset managers eager to use ‘sustainable’ in their marketing. Regulators urgently need to ensure that environmental claims are based on science. When science says we must immediately stop investing in new oil and gas fields, regulators must sanction any investor who sells so-called sustainable funds that include companies developing such projects.”
National regulators have been questioning the sustainable credentials of Article 9 funds; Reclaim Finance highlighted the Dutch regulator announced in September it was launching an investigation into funds following concerns about their sustainability, and in France, the chairman of regulator AMF (Autorité des marchés financiers) declared fossil fuels had no place in sustainable funds – but both did not discuss how they would reinforce the controls on these funds.
They must go further, according to Reclaim Finance:
“French investors are at the top of the list of Europe’s biggest fraudsters. If AXA and Amundi recently anticipated the criticism by massively downgrading their funds previously sold as sustainable, nothing will prevent them from doing it again. The AMF must urgently define the minimum standards to be respected in order to be labelled sustainable”, added Cuvelier.
Earlier this year, research by FE fundinfo found that as many as 1,500 Article 9 funds were at risk of having the status removed as they are not investing solely in sustainable investments as required – or are not making data available to demonstrate they do so.