Latest reports suggest that fast fashion labels, fossil fuel companies and SUV-makers are present in EU-regulated “sustainable” funds that tout their ethical credentials in their names, the Guardian and media partners can reveal, with $18bn (£14bn) of their investments going to the 200 biggest polluters.
An analysis of data from the last quarter of 2023 shows that Investors hold more than $87bn (£68bn) in funds that disclose under environmental and social sections of EU sustainable finance rules while including some of the biggest emitters of planet-heating gas. About one-fifth of the $87bn investments come from funds that also market themselves using environmentally-friendly terms.
Campaigners have also called for tighter rules on labelling, arguing that the current system confuses investors and means ordinary people unwittingly contribute to climate breakdown.
“Pension savers and the general public are being misled when it comes to sustainable finance,” said Lara Cuvelier, a sustainable investment campaigner at Reclaim Finance.
The investigation, led by Voxeurop in partnership with the Guardian and other media partners, identified the 25 biggest polluters in each of the eight most carbon-intensive sectors and tracked investments from funds that disclose under the EU’s sustainable finance directive.
The bulk of investments into the 200 biggest polluters came from funds classified under article 8, which promotes environmental or social goals, with a further $2bn coming from funds classified under article 9, whose main objective is sustainable investment.
The regulations were not designed for marketing purposes but the classifications are often used to showcase a financial product’s environmental credentials. This month the European Securities and Markets Authority (ESMA) and European banking and insurance watchdogs called for sweeping reforms to the system to tackle greenwashing.
“Status as ‘article 8’ or ‘article 9’ products have been used since the outset in marketing material as ‘quality labels’ for sustainability, consequently posing greenwashing and mis-selling risks,” the watchdogs said. They called instead for simpler product categories that are clearer to investors.
Story was adapted from the Guardian.
