NGO ClientEarth has taken aim at BlackRock in alleging that European investments marketed as “sustainable” include substantial exposure to fossil fuels which misleads consumers. The NGO has sent a letter to the French Regulator Autorité des marchés financiers (AMF) seeking an investigation. Net Zero Investor recently covered the story, writing that:
“While ClientEarth has in the past targeted fossil fuel firms directly, the case marks the first greenwashing complaint against a financial institution. It is based on research conducted by Reclaim Finance which has flagged 18 actively managed retail investment funds marketed in France and across Europe which are branded as ‘sustainable’ but collectively hold more than $1bn of fossil fuel investments. Reclaim Finance said that individual funds have between 1 and 27% of exposure to fossil fuel assets.”
BlackRock denies wrongdoing, stating that their sustainability funds conform to laws of the countries in which they are marketed. The article notes that the European Securities and Market Authority (ESMA) does not prevent sustainability-labeled funds from investing in fossil fuels. This is one major complaint about the EU’s current sustainable finance regulations: sustainability-labeled funds are often not Taxonomy aligned and while they may make disclosures in line with the SFDR, those disclosures may not impact their investment practices. The EU is currently working to solve this problem with one proposal arguing that the EU Taxonomy should be elevated to require more substantive action from sustainability-labeled funds. Until such changes are made, sustainability funds like BlackRock’s likely do not run afoul of the EU’s sustainable finance laws.
We may see interesting interplay between EU and US regulations and enforcement concerning investment strategies given the SEC is also actively targeting investors and funds that don’t follow their stated ESG/sustainability investment strategy as Lawrence blogged.
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