The NGO Reclaim Finance denounces the presence of companies developing fossil energy projects in several hundred passive funds that are nevertheless sold as “sustainable”, according to a report published on Wednesday.
Reclaim Finance “reveals that 70% of the 430 passive funds analyzed” which claim to be “sustainable” are in fact “exposed to companies developing new fossil fuel projects, investments destructive to the climate”, assures the NGO in a press release issued Wednesday.
In detail, 416 of these companies were present in at least one of the funds identified.
A passive fund automatically replicates an index or part of the market. The flagship product of this management method is the ETF (Exchange Traded Fund), a fund listed on the stock exchange.
ExxonMobil, TotalEnergies, Shell, Adani, Mitsubishi and even Glencore are all companies identified in “funds labeled as sustainable or responsible” even though they are “now prohibited” by “at least three European sustainable investment labels: the Belgian Towards Sustainability label, and the French Greenfin and ISR labels,” explains Reclaim Finance.
The NGO claims to have analyzed a total of 2.648 billion US dollars in assets under management from five managers, BlackRock, Amundi, UBS AM, DWS and Legal & General Investment Management (LGIM).
These five players combined “still held at least US$227 billion in fossil fuel developers in 2023” and “more than half of this amount came from passive portfolios,” the report adds.
“Passive funds are becoming a blind spot in asset managers’ climate policies. Indeed, in the vast majority of cases where investment restrictions are implemented for certain fossil fuel companies, passive funds are excluded from the scope of application,” regrets the NGO.
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“It’s time for institutional investors and regulators to wake up and take action to put an end to these misleading claims,” comments Lara Cuvelier, Sustainable Investments campaigner at Reclaim Finance.
According to the IPCC, humanity must reduce its greenhouse gas emissions, mainly from the fossil fuel industry, by 43% by 2030 compared to 2019 to hope to meet the limit of 1.5°C. of warming since the pre-industrial era.
The COP28 in Dubai in December concluded with an unprecedented agreement for a “transition away from fossil fuels”, while leaving ample room for maneuver for their use in the medium term.