Greenwash: Thousands back petition complaining fund managers are at ‘absolute liberty’ to define sustainable investing

Civil society warns EU taxonomy could be lost to ‘army of lobbyists’

Almost 30 NGOs have joined forces to urge European politicians and policymakers to protect the credibility of the European Union’s planned green taxonomy, warning that “an army of lobbyists is trying to sabotage the law”.

In a letter penned by groups including WWF, ShareAction, Finance Watch, Global Witness and Sum of Us, five amendments to the existing taxonomy proposal – which seeks to define which business activities can credibly be called ‘green’ – were laid out. They include extending the taxonomy’s categories to identify “the least sustainable” business activities, too, in order to highlight those investments that undermine the Paris Agreement, as well as those that support it.

Market participants should have to disclose the extent to which “all of their investments are compliant with the ‘environmentally sustainable’ criteria”, rather than just those offering labelled ‘green’ funds and products – as is currently proposed. Those that are offering labelled products should have to satisfy the taxonomy’s scientific criteria, as opposed to simply being transparent about the level of alignment, they added.

Stronger social safeguards should be included when defining sustainable green activities, there should be no room for wrangling on the implementation of the taxonomy and there should be no political interference in the science-based nature of the framework.

One of the key issues currently being negotiated between European Parliament, Commission and Council is the timeframe of the taxonomy legislation. The Commission had originally proposed that the rules be brought in next year, but the Council of the European Union, which represents member states, is fighting for it to be delayed until 2022. A decision is expected by the end of the year.

Alongside the letter, the NGOs set up a petition to “fight against the lobbies of ‘fake green’”.“More wealth than the US, Germany, UK and France combined produce in a year are being managed in so-called ‘green funds’,” the petition says, claiming that in reality, many “are anything but green”.

“Money-hungry investors label multinationals of fossil fuels, polluting transport, nuclear power, intensive agriculture and pesticides as ‘green’. How is this possible? Because, currently, fund managers are at absolute liberty to define what is ‘sustainable’. It’s like letting the fox guard the hen house.”

“It’s like letting the fox guard the hen house.”

The EU taxonomy, it continues, is a chance to tighten up definitions of green, but “sadly, an army of lobbyists is trying to sabotage the law, weakening its criteria and postponing its adoption date”. The petition against such lobbying has been signed by almost 75,000 people, according to its webpage.

Earlier this month, UK-based wealth manager SCM Direct – co-founded by high-profile anti-Brexit campaigner Gina Miller – released a report titled Greenwashing: Misclassification and Mis-selling of Ethical Investments. The research concluded that there are “no rules or regulations on the calculation of ethical data” and that “some funds appeared to be mis-classified as having an ‘ethical’ investment focus”.

“Various ethical funds were found to be investing material amounts in tobacco, alcohol, gambling and defence stocks,” it claims, saying data provided by companies is not audited and “open to abuse”.

One unnamed ethical fund it assessed reportedly had 96% of its assets in UK gilts, with 3% in an ethical portfolio and 1% in cash. It also accused ethical equity funds as largely underperforming the market.