European ESG funds heavily invest in fossil fuels

European ESG funds have invested a significant $134 billion in companies that promote fossil fuel expansion. NGOs Urgewald and Facing Finance released a report stating that this investment represents a serious case of greenwashing among over one-third of the 14,000 ESG-labeled funds they analyzed. The funds in question are classified as Article 8 and Article 9 funds under the EU's Sustainable Finance Disclosure Regulation, introduced in 2021. Article 8 funds claim to promote ESG goals, while Article 9 funds focus on sustainable investments. The research found that nearly 5,000 of the funds analyzed are linked to fossil fuel investments. Major oil and gas companies, including TotalEnergies, Shell, and ExxonMobil, make up over $25 billion of these investments. Despite new ESG fund naming rules proposed by the European Securities and Markets Authority, many funds remain uninformed. Two-thirds of the Article 8/9 funds examined do not include ESG-related terms in their names. Frederike Potts, a financial analyst at Facing Finance, expressed concern that retail investors struggle to understand where their money is going, often investing in harmful companies unknowingly. Last year, Reclaim Finance highlighted that 70% of passive funds marketed as “sustainable” by major asset managers were also tied to new oil and gas projects.