A survey by Vox Europe and European Investigative Collaborations examines the data for the last quarter of 2023 of over 4,300 funds labeled sustainable under the SFDR. A quarter of the investment volume - about 85 billion euros - goes to the most polluting companies in the oil & gas, fashion and automotive sectors
How much does the lack of clarity on how to label sustainable funds weigh?
The EU is recalibrating rules and tools to limit greenwashing in sustainable finance. How many investments labeled ESG are directed toward the most polluting companies? A not negligible share. Only the top 10 asset managers are responsible for more than 25% of all EU-regulated sustainable fund investments – or €87 billion – in the top 25 emitters of greenhouse gases in each of the top 8 carbon-intensive sectors.
This is the data that emerges from a survey conducted by Vox Europe and European Investigative Collaborations, pointing the finger against the misuse of the SFDR (Sustainable Finance Disclosure Regulation) as an indicator of the effective sustainability of financial products. This is something that the ESAs have also recently expressed, asking the Commission for substantial changes, including the introduction of new sustainability categories and a sustainability indicator to formally classify funds.
Among the sectors that receive the most investment through inclusion in sustainable funds, although they are among the biggest polluters, include especially fast fashion brands, fossil companies and some car companies with an even smaller offer of electric cars.
Big emitters hidden in sustainable funds
Under the SFDR, investments labeled as ESG fall under Article 8 when they also promote environmental or social aspects, while under Article 9 if sustainability aspects are the main objective of the funds. The survey reviewed data for the last quarter of 2023 for more than 4,300 of these sustainable funds. Among their folds, 200 of the most polluting companies have received $85 billion from Article 8 and $2 billion from Article 9 funds.
Driving this flow of money are over 700 financial institutions of which most are based in France, Germany and Italy for the European landscape, and in the United Kingdom, the United States and Hong Kong for the global one. The three sectors that receive the most money from sustainable funds attract 77% of investments labeled as “green”: oil & gas $33 billion, automotive $22 billion, fashion $15 billion.
Not only. More than 20% of the “green” investments directed towards the top 10 polluters in the list drawn up by the survey end up in funds that carry “sustainable” denominations to attract investors. The share rises to 55% for the Article 9 sustainable funds, equal to over $1 billion.
This situation should change with the entry into force of the CSRD Directive and the Green Claims Directive, in addition to the Company Due Diligence Directive. All of these measures promise to reverse course and bring clarity to what can be defined as a sustainable fund.
