Sustainable investment funds “barely manage” to redirect more capital towards a more sustainable economy than conventional funds and risk creating reputational and legal risks, a Greenpeace study has found.
The study, conducted by the environmental NGO’s teams in Luxembourg and Switzerland, analyses 51 sustainable-labelled funds from the two countries. The funds are assessed on the environmental and social impacts of the products and services offered by investee companies across their entire lifecycle, and their compatibility with EU sustainability regulation. They are also assessed for scope 1-3 carbon intensity, exposure to high-impact activities such as fossil fuels or agriculture, and exposure to companies involved in serious environmental controversies.
Inrate, the Swiss sustainability rating agency that conducted the research for Greenpeace, found that – when compared with non-labelled investment funds – sustainable funds offered marginally more positive impact on the environment and society. There was no significant difference between sustainable and conventional funds in carbon intensity and exposure to harmful sectors.
However, there was a noticeable difference in sustainable funds avoiding serious environmental controversies compared to conventional funds.
The study also analysed different sustainable investment approaches such as best-in-class, ESG integration, exclusion and positive selection. It found exclusions did not significantly reduce exposure to fossil fuels and best-in-class or positive selection did not significantly improve ESG impact or carbon intensity.
Last year, research from Morningstar found 60% of ‘ex-fossil funds’ have fossil fuel exposure.
Dr. Regina Schwegler, Head of Research at Inrate, said the Greenpeace research suggested that sustainable funds do not yet contribute sufficiently to sustainable development and recommends the setting of impact-related investment goals, looking at effects on the environment and society.
Both Luxembourg and Switzerland have staked claims on being sustainable finance centres. A recent report from Swiss Sustainable Finance found inflows to sustainable finance had increased 31% to CHF1.5bn over 2020.
Greenpeace said: “Though commendable in principle, there is a problem with the ‘green finance’ trend. There is neither a clear definition of nor an accepted industry standard for sustainable investments. Without clear guidelines on what constitutes sustainable investments, there is a great danger of greenwashing, misleading customers into thinking they are making sustainable investments when in fact their money does not end up having a positive impact on the environment and society.”
A recent report from think tank 2 Degrees Investing Initiative, entitled Sustainable finance and market integrity: promise only what you can deliver, raised similar concerns. It found the level of evidence of impact available for French sustainable-labelled retail products was low.
Based on the environmental claims of 353 funds, the report found 69% of environmental claims are unclear as to the aspect of the financial product that is supposed to generate the environmental impact.
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: