Wednesday 20 March 2024<\/span> \u2013<\/span> Asset managers are greenwashing passive funds<\/span>, according to new analysis<\/span> published today<\/span> [1]<\/span>.<\/span> With the number of <\/span>passively-managed<\/span> investments growing, <\/span>Reclaim Finance examined <\/span>4<\/span>3<\/span>0 <\/span>\u201csustainable\u201d passive funds managed by five of the biggest asset managers<\/span> in Europe <\/span>and <\/span>the United<\/span> States <\/span>and <\/span>found <\/span>that 70% were exposed to companies developing new fossil fuel projects<\/span>.<\/span> Reclaim Finance is <\/span>warn<\/span>ing<\/span> that these<\/span> investments<\/span> are<\/span> fueling<\/span> climate change<\/span> and is urging<\/span> regulators to outlaw <\/span>sustainable claims for <\/span>funds support<\/span>ing<\/span> fossil fuel expansion<\/span>.<\/span><\/span>\u00a0<\/span><\/p>\n<\/div> The new analysis finds that five of the biggest passive fund managers, Amundi, BlackRock, DWS, Legal & General Investment Management (LGIM) and UBS AM are turning a blind eye to the climate impact of their passive investments, with funds invested in oil giants including TotalEnergies, Shell and ExxonMobil, and coal developers such as Glencore and Adani. In total 70% of the 430 passive funds with \u201csustainability\u201d claims analyzed [2] were exposed to fossil fuel companies who continue to expand their fossil fuel production, locking in climate-wrecking emissions for generations to come.<\/p>\n<\/div> For example, the <\/span>BlackRock ACS World ESG Equity Tr<\/span>ac<\/span>k<\/span>e<\/span>r F<\/span>un<\/span>d <\/span>holds<\/span> US$<\/span>499 <\/span>million in fossil fuel developers, including ExxonMobil, <\/span>Shell<\/span> and Chevron<\/span>.<\/span> ExxonMobil<\/span> is the world\u2019s <\/span>7<\/span><\/span>th<\/span><\/span> biggest oil and gas <\/span>developer<\/span>, <\/span>seeking to expand its production and resulting carbon emissions<\/span> [3]<\/span>.<\/span> <\/span>Analysis of its strategy<\/span><\/span><\/a> s<\/span>hows that <\/span>by 2030<\/span>, business as usual will mean that it will overshoo<\/span>t a net-zero emissions pathway by 39%. <\/span> [<\/span>DWS\u2019 <\/span>Xtrackers<\/span> MSCI AC World ESG Screened ETF <\/span>holds<\/span> US$114 million <\/span>in<\/span> foss<\/span>il fuel developers, <\/span>including investments<\/span> in Shell, ExxonMobil and <\/span>TotalEnergies<\/span> [<\/span>4<\/span>]<\/span>.<\/span> TotalEnerg<\/span>i<\/span>es<\/span>\u2019 expansion plans include exploitation of <\/span>Papua LNG<\/u>,<\/a> which would add <\/span>at least <\/span>220 million tons of CO2 emissions, the equivalent of the total <\/span>annual <\/span>emissions of Bangladesh.<\/span><\/span><\/p>\n<\/div> With an increasing volume of assets now managed via passive funds [5], the findings raise questions about the climate impact of these investments which are supporting the development of a new generation of fossil fuel production resulting in future carbon dioxide and methane emissions. The International Energy Agency\u2019s net-zero emissions scenario indicates that there is no room for new oil and gas fields if global temperature rise is to be limited to 1.5\u00b0C. The report queries how assets managers intend to manage their decarbonization, given that most do not apply their climate policies to passive products.<\/span><\/p>\n<\/div><\/div><\/div> Asset managers are fueling the climate crisis with their so called \u00ab\u00a0sustainable\u00a0\u00bb passive funds! While they are marketed as sustainable, these passive funds are invested in companies that are expanding fossil fuel production. Even <\/span>a<\/span>sset managers <\/span>which <\/span>claim to have climate policies<\/span> are part of the problem<\/span> as <\/span>most <\/span>don\u2019t<\/span> apply <\/span>their policies to passive funds.<\/span> It is time <\/span>for<\/span> <\/span>institutional investors <\/span>and regulators<\/span> to <\/span>wake up and <\/span>take action to stop<\/span> these misl<\/span>eading claims.<\/span><\/span><\/em><\/p>\n<\/div> Lara Cuvelier, Sustainable Investment Campaigner at<\/span> Reclaim Finance<\/span><\/strong><\/p>\n<\/div><\/div><\/div> The analysis highlights how asset managers are relying on \u201csustainable\u201d indexes to identify investments for passive funds, but these indexes do not exclude fossil fuel developers [6]. Analysis of the index methodologies used for 25 of the \u2018sustainable\u2019 funds found that they contain \u201csignificant flaws\u201d and are not based on scientific criteria when it comes to greenhouse gas emissions.<\/span> While some asset managers have policies which commit to restricting new investments in fossil fuels <\/span>(most often for coal<\/span>)<\/span>, few apply these policies to their passive investments<\/span> and therefore also make misleading <\/span>\u2018sustainability’ <\/span>claims<\/span>.<\/span><\/span><\/p>\n Reclaim Finance is urging regulators to <\/span>act on the misleading use of sustainable <\/span>claims<\/span> for f<\/span>u<\/span>nds by introducing <\/span>minimum<\/span> standardiz<\/span>ed mandatory criteria<\/span>. <\/span>Fossil fuel developers <\/span>should <\/span>not <\/span>be allowed in passive funds marketed as ESG or as \u201csustainable<\/span>\u201d.<\/span> And<\/span> the<\/span>y call<\/span> on European regulators to introduce new measures <\/span>to <\/span>ensur<\/span>e<\/span> that <\/span>asset managers<\/span>\u2019 climate <\/span>commitments<\/span> apply to <\/span>all their <\/span>funds<\/span>, including those<\/span> managed passively<\/span>.<\/span><\/span><\/p>\n<\/div>