The campaign group ClientEarth has filed a letter of complaint against investment giant BlackRock to the French regulator, accusing the firm of greenwashing.
In a letter sent to the French Regulator Autorité des marchés financiers (AMF), campaigners highlight that fact that BlackRock is marketing funds as “sustainable” which are invested in fossil fuel companies.
“We believe that this means BlackRock is greenwashing by calling these funds “sustainable”, and investors and the public need to know” ClientEarth said in a statement.
“We know that investors in France and elsewhere want to take sustainability into account in their investment choices – including fossil fuel expanders in ‘sustainable funds’ stops them doing that and undermines the integrity of the market for sustainable financial products” the campaign group added.
While ClientEarth has in the past targeted fossil fuel firms directly, the case marks the first greenwashing complaint against a financial institution.
It is based on research conducted by Reclaim Finance which has flagged 18 actively managed retail investment funds marketed in France and across Europe which are branded as “sustainable” but collectively hold more than $1bn of fossil fuel investments. Reclaim Finance said that individual funds have between 1 and 27% of exposure to fossil fuel assets.
Commenting on the case, Laura Clarke, CEO of ClientEarth stressed that the group is aiming to see further enforcement from financial regulators to ensure investment firm funds labelled ‘sustainable’ are in fact sustainable - and not fuelling climate breakdown.
Beyond that, ClientEarth wants BlackRock itself to either change the language it uses when marketing its investments, or to reallocate its 'sustainable' fund portfolios so that its investments are consistent with how it presents these funds to the public.
Clarke added that it was important for “investment managers to heed the warning of this complaint against BlackRock, and for regulators around the world to pay attention to how investment companies are marketing their 'sustainable' funds.”
ClientEarth’s complaint to the French regulator could potentially set an in important precedent for greenwashing cases in the EU.
In August, Australian regulators had ordered Mercer Superannuation fund to pay a A$11.3m penalty due to misleading sustainability claims in its superannuation investment options.
While the US and UK have also introduced greenwashing regulation for financial markets, EU financial market regulation is so far predominantly in the hands of individual national regulators.
French Regulator AMF has made greenwashing a priority. In July this year, it had issued a warning that international funds marketed to French retail clients as sustainable featured mismatches and inaccuracies.
If an asset manager is found to be engaging in greenwashing, AMF is authorised to issue fines, public warnings or take further enforcement action.
In response to these allegations, BlackRock stressed that its funds marketed as sustainable in Europe are not currently breaking any rules.
“BlackRock’s funds are managed in accordance with their investment objectives, that are clearly disclosed in each fund’s prospectus and on BlackRock’s website. BlackRock’s sustainable funds are managed in line with applicable regulations governing sustainable investing” a spokesperson said.
ESMA, the European Securities and Markets Authority defines greenwashing as "a practice where sustainability related statements, declarations, actions, or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product or financial service. This practice may be misleading to consumers, investors, or other market participants."
In practice, this means that funds labelled as Article 6 or Article 8 funds must have a certain percentage of assets deemed sustainable in their portfolio. However, for the time being, ESMA does not yet prevent funds with a sustainable label from being invested in fossil fuels.
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