“Pension savers and the general public are being deceived”

A recent report found that European Union-regulated sustainability funds have invested $18 billion in 200 of the world’s biggest polluters.

What happens?

An investigation led by news channel Voxeurop and supported by the Guardian and other media analyzed the investments of the 25 biggest polluters in the eight industries most responsible for carbon emissions.

Data from the last quarter of 2023 show that about 20% of the $87 billion classified under the environmental and social sections of the EU’s Sustainable Finance Directive “comes from funds that also market themselves under environmentally friendly conditions.”

The majority of the $18 billion in investments in the 200 companies – including fast-fashion brands, fossil fuel companies and SUV makers – fell under Article 8, which focuses specifically on environmental or social concerns. Another $2 billion came from funds falling under Article 9, which focuses on sustainability.

“Europe’s largest green portfolios are nothing more than the same dirty companies, just repackaged as sustainable,” Xavier Sol, director of sustainable finance at Transport and Environment, told the Guardian.

The investigation also found that $11.7 billion of the funds allocated to the biggest polluters came from funds labelled “ESG,” or environmental, social and governance. $1.1 billion came from funds whose names included buzzwords such as “clean,” “transition,” “net zero” and “Paris,” the last two referring to the Paris Agreement.

In addition, the investigation found that just ten asset managers were responsible for 25 percent of investments in major polluters. A few, including Amundi, Intesa Sanpaolo and Fidelity, denied any wrongdoing and claimed the investments did not harm green initiatives.

Why are investments important?

According to the Guardian, “the classifications are often used to highlight the environmental friendliness of a financial product.” However, several companies have taken advantage of the relaxed guidelines to portray themselves as more environmentally friendly – ​​also known as greenwashing.

This manipulation tactic is often used by companies operating in the dirty energy sector and large corporations, allowing them to gain financial benefits while maintaining the appearance of environmental consciousness.

“The status of ‘Article 8’ or ‘Article 9’ products has historically been used in marketing materials as a ‘label’ for sustainability and therefore carries the risk of greenwashing and mis-selling,” the European banking and insurance regulators said.

“Pension savers and the wider public are being misled about sustainable finance,” said Lara Cuvelier, a sustainable investment campaigner at Reclaim Finance, of the Voxeurop and Guardian report.

What is being done against greenwashing?

Activists are calling for systematic reforms to ban greenwashing, such as stricter labeling rules to avoid consumer confusion.

Last month, the European Securities and Markets Authority introduced revised guidelines (PDF) designed to prevent fossil fuel companies from receiving significant funding if they present themselves as environmentally friendly. But the restrictions will not come into force until later this year, are not legally binding and do not need to be adopted by national governments.

“We now see that this is not enough,” Cuvelier said of the regulations.

Fortunately, there are recent efforts, such as the landmark case against Dutch airline KLM and a lawsuit against oil giants, that are holding those involved accountable for the global heating problem and offering hope for a cleaner, cooler future.

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