Half of “sustainable” investment funds put money in fossil fuel, airlines

Almost half of the investment funds in the most sustainable category invest in companies in the fossil fuel industry or aviation sector, Investico and Follow the Money (FTM) found in an investigation done in collaboration with eight other European media. Investors think they are contributing to a sustainable economy, but in reality, at least 8.5 billion euros of their money is in fossil companies, the investigative journalists said.

Since April last year, European investment funds must classify themselves into different sustainability classes. Investico and FTM looked at the funds in the Article 9 class, known within the financial sector as “dark green.” The European rules state that these funds cannot invest in anything that causes significant damage to people or the planet.

Of the 838 dark green funds in Europe, 388 invest in companies from the fossil industry and aviation and have no real strategy to reduce their dependence on fossil energy, the researchers discovered. They have 8.5 billion euros of their total portfolio of 619 billion euros in fossil companies. The picture is the same for funds available to Dutch investors. Almost half of “dark green” investment funds put money into fossil fuels and air travel.

For example, American assent manager Blackrock has one dark green fund with over a billion euros in fossil companies like German coal company RWE and the Italian utility company Enel. French fund provider BNP Paribas has three funds that include investments in Italian, French, and Portuguese oil and gas companies. And Actiam, an asset manager and insurer active on the Dutch market through brands Reaal and Zwitserleven, has ten funds with investments in “grey” companies ranging from a Norwegian state-owned oil company to China Airlines, Investico reported.

Various of these fund managers argued that they are allowed to invest in fossil companies. Blackrock, for example, said that the fossil companies in its dark green portfolio are the most sustainable in their class and, therefore, allowed. Actiam said that the European sustainability requirements are too vague.

The European Securities and Markets Authority (ESMA) told Investico and FTM that it is “rather difficult to argue” that fossil investments do not cause any social or environmental damage. The Dutch Authority for the Financial Markets (AFM) gave them a similar statement: “It is evident that shares in highly polluting companies do not belong in these funds.” Though the AFM also acknowledged that Europe’s sustainability requirements could be clearer.

A spokesperson for the investors’ association VEB told Investico and FTM that these funds are misleading their investors. “It is really reprehensible if you use a dark green label to raise billions without being actually sustainable. Such a label is not a marketing tool, but a promise to investors.”