Fast fashion brands, fossil fuel companies, and SUV makers that are part of EU-regulated “sustainable” funds and claim to be ethical, have invested $18 billion in the 200 biggest polluters. This has been revealed through an investigation led by Voxeurop in partnership with the Guardian and other media houses.
Investors have over $87 billion in funds that disclose under EU sustainable finance rules but still include major polluters according to an analysis of data from the last quarter of 2023. Around one-fifth of these investments are marketed with environmentally-friendly terms.
Calling for tighter labelling rules, campaigners argue that the current system confuses investors and means ordinary people unknowingly contribute to climate breakdown. Lara Cuvelier, a sustainable investment campaigner at Reclaim Finance said that pension savers and the general public are being misled when it comes to sustainable finance.
The investigation 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. It was found that the majority of investments into the 200 biggest polluters came from funds classified under Article 8, which promotes environmental or social goals, with another $2 billion coming from funds classified under Article 9, whose main objective is sustainable investment.
While the regulations are not designed for marketing purposes the classifications are being used to showcase a financial product’s environmental credentials. The European Securities and Markets Authority (ESMA) and European banking and insurance watchdogs have called for extensive system reforms to tackle greenwashing.
The analysis found that $11.7 billion of investments into the biggest polluters came from funds whose names included “ESG” while $1.1 billion where from funds having climate-specific words such as “clean”, “transition”, “net zero” and “Paris” in their names.
The analysis also found that the top 10 recipients of EU-regulated green funds include fossil fuel companies drilling for more oil and carmakers selling ever bigger vehicles. Also, one-quarter of the investments into big polluters came from just 10 asset managers.