Half of "green" or "sustainable" investment funs still invest in fossil fuels

More than half of investment funds with words like “sustainable” or “green” in the fund name still invest in fossil fuels, Trouw reports based on research by Platform Investico and Follow the Money. They are “misleading” investors, the European financial regulator ESMA said.

The researchers looked at almost 1,300 European funds with variations on “sustainability” in their titles. Over 200 of these funds are available to Dutch investors. More than half were found to contain investments in oil, gas, or coal companies. In the Netherlands, over 1.6 billion euros goes to the fossil industry through these funds, and around 7 billion euros in all of Europe.

For example, five equity funds from insurer ASR, with names like ASR Sustainable Worldwide Shares Fund, invest millions in oil companies like TotalEnergies and Repsol.

ABN Amro’s investment arm offers five funds with “ESG” in the title. That stands for Environmental, Social, & Governance and is used as a synonym for sustainability in the financial sector. These ESG funds invest over 18 million in Shell, Eni, and Azerbaijan, among others.

Blackrock has 40 “sustainable” funds in Europe that invest a total of 1.6 billion euros in fossil fuel companies including ExxonMobil and Saudi Aramco.

It is currently not legally prohibited for “sustainable” funds to invest in fossil fuels, but it is misleading, according to regulator ESMA. It is working on rules to ban this practice, which will be implemented later this year.

“A lot still needs to change,” Joost Schmets of the investor association VEB told Trouw. “There are still too many fund managers who think: I can get some cheap returns by attracting people with terms like ESG without adjusting my portfolio accordingly. People who are looking for a sustainable fund do not want to invest in fossil companies.”

ASR confirmed that its sustainable funds invest in fossil companies. A spokesperson said that the asset manager withdrew from the most controversial companies and is trying to enter into discussions with the others to make them more sustainable.

ABN Amro said that it would ensure that its products “comply with the new regulations as soon as they come into effect.”

Blackrock said that it is always transparent with its investors about the portfolios of investment funds.