Europe wants to combat greenwashing in investment funds. That is why ESMA (the European Securities and Markets Authority) launched guidelines months ago to control the use of terms such as Sustainable, Climate, ESG either Impact among others, in the denominations of the funds. It established what these funds must invest in (and in what proportion), and in what types of companies they cannot invest. These guidelines affect approximately 10% of EU funds, according to calculations by Sustainable Fitch (the sustainability division of the agency rating Fitch). This provider estimates that some 6,500 European funds include words like those mentioned in their names. And these new demands will force their managers to leave out a multitude of oil and gas companies that are currently in these portfolios. Visit the specialized portal elEconomista ESG.
Barclays figurein a report to which he has had access elEconomista.es, in more than 15,000 million euros the amount of money that funds with names sustainable They are invested in energy companies, mainly oil companies. The bank adds another approximately 2,200 million, which are invested in utilitiesand almost 4,000 in basic consumer companies that could violate ESMA thresholds. Among the listed companies potentially affected by the new guidelines there are well-known names such as the oil companies TotalEnergies and Eni (which have stakes in their capital from these funds of 132 and 97 million euros, respectively), the Italian energy company Snam (with 352 million) and another transalpine one, the utilities Hera (with 184 million invested).
The ESMA rule establishes that funds whose names include words like Sustainability, Impact either Environmental they will have to leave out companies that obtain 10% or more of their income from the prospecting, extraction, distribution or refining of fuels derived of oil; They must also exclude those companies that obtain 1% or more of their income from the prospecting, extraction, distribution or refining of coal and lignite. Companies that obtain 50% or more of their turnover from the exploration, extraction, manufacturing or distribution of gaseous fuels are also excluded; and the utilities that generate electricity above a certain emissions level. Fifty Spanish investment funds have ‘sustainable’ names that the CNMV will monitor.
These guidelines will have to be applied by managers starting next November 21 for newly created funds, while to adapt existing products the deadline is extended by six more months, until May 21, 2025. They have two options: divest from companies that do not pass the screening, or change the name of the funds. But the experts consulted affirm that they will most likely choose to disinvest. Companies linked to oil or gas may be included in funds whose names include words like Transitionfor which ESMA establishes more basic exclusions (they cannot invest in controversial weapons, tobacco or in companies that violate human rights). Investors don’t like these funds anymore greenwho want to position themselves only in the most demanding products.
Aside from these exclusions, ESMA also establishes a strong requirement for funds, whether they are the least demanding (which incorporate terms such as Transition, Social, Governance) or the purest ones (those that 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 Sustainability, “should provide greater security for the end client when making sustainable investments. That is, they should allow the name used in the investment funds to reflect as closely as possible the type of underlying investments of the vehicle. However, the language and the terminology used in terms of sustainable investment is increasingly broad and complex, and sometimes it could be difficult (or almost impossible) for a single word to fully describe the characteristics of the sustainable investment strategy.
The fact that so far we have seen oil companies 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 the companies. Therefore, it could be the case that, under an ESG approach, an investment fund does invest in an oil company, as long as it has a high ESG profile. Therefore, In these cases, a case of greenwashingbecause the investment seeks to reward the best practices in relation to sustainability, which ultimately are aimed at better management of extra-financial risks,” explains Claudia Antuña.
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