A staggering £14bn from EU-regulated ‘sustainable’ funds has been channelled into the world’s 200 biggest polluters, according to an in-depth analysis by the Guardian and its media partners. Despite their green credentials, these funds invest in companies known for significant environmental impacts, from fossil fuel behemoths to carmakers producing large, fuel-intensive vehicles.
Data from the last quarter of 2023 shows investors hold more than £68bn in funds that align with the EU’s sustainable finance regulations. However, nearly one-fifth of these funds, marketed under eco-friendly and ethical labels, include some of the most significant contributors to global emissions.
Environmental advocates are calling for more stringent regulations on labelling, arguing the current framework misleads investors and contributes to environmental degradation. Lara Cuvelier, from Reclaim Finance, highlighted that pension savers and the general public are misled by the 'sustainable' labels.
The investigation identified substantial investments from funds disclosed under the EU's Sustainable Finance Disclosure Regulation (SFDR). Particularly concerning are funds classified under Article 8, which are supposed to promote environmental or social objectives, and Article 9, which claim to primarily pursue sustainable investments.
Critics argue these classifications have been misused as marketing tools rather than genuine indicators of sustainability. The European Securities and Markets Authority (ESMA) has called for significant reforms to curb greenwashing, urging simpler and clearer product categories for investors.
Despite these efforts, $11.7bn of investments into the top polluters came from funds using “ESG” in their names, and $1.1bn from funds incorporating climate-related terms like “clean” or “net zero.” Fossil fuel firms and major automakers are among the top recipients of these investments, contradicting the supposed green objectives of these funds.
Campaigners are pushing for private capital to genuinely support the green transition. They argue that only investments in genuinely green activities should bear the sustainable label. With the ESMA tightening guidelines to prevent funds with significant fossil fuel holdings from branding themselves as green, the pressure is on to ensure that sustainability claims are backed by real action.
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