Eighty-nine per cent of EU investment funds using sustainability-related terms in their names, or that define themselves as having at least some sustainability objectives, have portfolios that are not aligned with achieving net zero emissions, research by think-tank InfluenceMap has found.
The think-tank analysed the net zero alignment of 3,535 EU-domiciled investment funds that have ESG or climate-related terms in their names and/or define themselves as Article 8 or Article 9 funds under the EU’s Sustainable Finance Disclosure Regulation.
The analysis was based on their holdings of companies in the power, oil and gas, coal mining and automotive sectors. It compared the forecasted emissions of these companies between 2023 and 2028 with emissions compatible with the International Energy Association’s net zero emissions by 2050 scenario.
The study also found that a third (33 per cent) of the same funds had larger investment holdings in fossil fuel businesses than in “green” companies — those that derive at least 75 per cent of their revenue from activities aligned with the EU taxonomy for sustainable activities.
In a statement published alongside the research, InfluenceMap suggests the findings call into question the effectiveness of the SFDR in “limiting greenwashing” within the investment fund markets.
“Thousands of funds are representing themselves as climate positive, either by using climate-related names or by disclosing under Article 8 or Article 9 — despite their underlying investments painting a very different picture,” says InfluenceMap senior analyst Tom Alcoran.
The SFDR came into force for EU-domiciled investment funds in March 2021. It requires funds to self-categorise into three categories: Article 6 — funds with no sustainable characteristics; Article 8 — funds that promote environmental or social characteristics; and Article 9 — funds that have “sustainability” as their primary investment objective.
You can read the full report here.