ByCharles Kennedy– Mar 19, 2025, 9:30 AM CDT
European ESG funds have invested $134 billion (123 billion euros) in companies actively pushing fossil fuel expansion projects or lacking a credible Paris-aligned coal phase-out plan, in what NGOs Urgewald und Facing Finance say is a massive greenwashing by well over one-third of the 14,000 ESG-labeled funds analyzed.
The ESG funds are known as Article 8 and Article 9 funds under the EU’s Sustainable Finance Disclosure Regulation (SFDR), adopted in 2021. The so-called Article 8 funds are registered as “promoting” ESG goals, while the “greenest” funds, the Article 9 products, are those funds that have sustainable investment as their objective.
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Now extensive financial research by Urgewald and Facing Finance found that nearly 5,000 out of the more than 14,000 ESG funds analyzed invested in companies pushing fossil fuels expansion.
The six oil and gas majors – TotalEnergies, Shell, ExxonMobil, Chevron, Eni, and BP – alone account for investments worth $25.6 billion (23.5 billion euros), the NGOs said in a new report published on Wednesday.
The new rules on the naming of ESG funds, presented by the European Securities and Markets Authority (ESMA), are a step in the right direction, the organizations said.
However, Urgewald and Facing Finance’s research shows that of the almost 14,300 Article 8/9 funds examined, two-thirds (9,420 funds) are not covered by the new ESMA guideline since no ESG- or sustainability-related terms appear in their names.
“Retail investors in particular can hardly see through the ESG jungle and often have no idea in what dirty companies they are investing their money,” said Frederike Potts, financial analyst at Facing Finance.
“It is beyond reason why funds with the term ‘transition’ in their name are allowed to keep investments in companies that are slowing down the transformation of our energy systems and pursuing fossil fuel expansion projects.”
Last year, environmental organization Reclaim Finance said that a total of 70% of passive funds passed off as “sustainable” by five of the largest asset managers in the U.S. and Europe are exposed to companies developing new oil and gas projects.
By Charles Kennedy for Oilprice.com
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