Europe wants to fight greenwashing in investment funds. This is why ESMA (the European Securities and Markets Authority) launched guidelines a few months ago to control the use of terms such as Sustainable, Climate, ESG either Impact among other things, in the names of the funds. It established what these funds must invest in (and in what proportion) and what types of companies they cannot invest in. These guidelines affect around 10% of European funds, according to calculations by Sustainable Fitch (the sustainable development division of the agency rating Fitch). This provider estimates that some 6,500 European funds have words like those mentioned in their names. And these new requirements will force their leaders to leave aside a multitude of oil and gas companies that currently appear in these portfolios. Visit the specialized elEconomista ESG portal.
Barclays figurein a report to which he had access elEconomista.es, in addition to 15 billion euros, the amount of money who finances with names sustainable They invest in energy companies, mainly oil. The bank adds around 2.2 billion more euros, which is invested in utilitiesand almost 4,000 in consumer staples companies that could violate ESMA thresholds. Among the listed companies potentially affected by the new guidelines are well-known names such as oil companies TotalEnergies and Eni (which hold equity stakes in these funds of 132 and 97 million euros respectively), the Italian energy company Snam ( with 352 million) and another transalpine, the utilities Hera (with 184 million invested).
The ESMA rule states that funds whose names include words such as Sustainability, Impact either Environmental they will have to exclude companies that get 10% or more of their revenue from the prospecting, extraction, distribution or refining of derived fuels oil; They must also exclude companies that derive 1% or more of their revenue from the exploration, extraction, distribution or refining of coal and lignite. Also excluded are companies that generate 50% or more of their turnover from the exploration, extraction, manufacturing or distribution of gaseous fuels; and the utilities which produce electricity above a certain level of emissions. Fifty Spanish investment funds have “sustainable” names that the CNMV will monitor.
These guidelines must be applied by managers from November 21 for newly created funds, while to adapt existing products, the deadline is extended by another six months, until May 21, 2025. They have two options: disengage from companies that do not pass the exam, or change the name of the funds. But the experts consulted say they will most likely choose to disinvest. Oil or gas related companies may be included in funds whose names contain words like Transitionfor which ESMA establishes more fundamental exclusions (they cannot invest in controversial weapons, tobacco or in companies that violate human rights). Investors no longer like these funds Greenwho wish to position themselves only on the most demanding products.
Beyond these exclusions, ESMA also establishes a strong requirement for funds, whether they are the least demanding (which include terms such as Transition, Social, Governance) or the purest (those who use words like Sustainability, ESG, Green, Climate): at least 80% of your investments must meet sustainable investment objectives. The new rules, explains Claudia Antuña, AFI partner responsible for sustainable development, “should offer greater security to the end customer when making sustainable investments. In other words, they should allow the name used in investment funds to reflect as closely as possible the type of underlying investments of the vehicle However, the language and terminology used in terms of sustainable investing is increasingly broad and complex, and it can sometimes be difficult (if not almost impossible) to find a single word to fully describe the characteristics of the strategy. sustainable investment.
The fact that so far we have seen oil companies investing in green funds is not necessarily greenwashingadds this expert. “The abbreviation ESG It refers not only to environmental issues, but also to social and governance issues. Furthermore, these issues do not refer to the economic activity of companies. It is therefore possible that, as part of an ESG approach, an investment fund invests in an oil company, provided that it has a high ESG profile. SO, In these cases, a case of greenwashingbecause the investment seeks to reward best practices in sustainability, which ultimately aim for better management of extra-financial risks”, explains Claudia Antuña.
