20 Sep 2019 The case for closer oversight of the ESG fund industry

“Green-friendly ETFs hold shares in groups with coal operations” said Financial Times on September 19, 2019.

The case for closer oversight of the ESG fund industry is the conclusion of the analysis conducted by the environmental research group InfluenceMap on a basket of 118 climate-themed funds listed on exchanges around the world which contains roughly the same aggregate intensity of exposure to thermal coal reserves in constituent companies as the iShares MSCI World Index Fund. The basket has $18bn assets under management and the analysis points out that those investment funds which claimed were excluding fossil fuels from their portfolio are actually holding shares in companies with significant coal operations.

Some companies mentioned, such as BlackRock and Russell Investments, alleged some explanations to Financial Times. The responses highlighted the existence of a controversial “safety zone” in which they say they stay. Some others did not respond to criticism.

The report, however, raises the concern  about how reliable are these products and calls into question the role of regulators. The EU is progressing in standardizing “ESG taxonomy“, however there is little centainty on the present products and investors are not in a position to make informed choices.

For further information, see the research of InfluenceMap:

https://influencemap.org/report/Climate-Funds-and-Fossil-Fuels-8f2c813ed814fe5b1eef61b48497b592

For further information, see the article of Financial Times as of September 19, 2019:

https://www.ft.com/content/f521da66-da64-11e9-8f9b-77216ebe1f17