Environment law NGO ClientEarth has filed a complaint against asset management giant BlackRock with France’s financial markets authority for allegedly misnaming multiple retail investment funds as “sustainable.”
In its complaint to the French regulator, the AMF, ClientEarth said 18 of BlackRock’s actively managed retail investment funds provided in France included the term “sustainable” in their names but “each of the target funds has material exposure to fossil fuel companies that are developing new fossil fuel projects or capacity; and/or are not phasing out fossil fuel production consistently with the Paris Agreement temperature goals.” Retail investment funds include mutual funds designed for individual investors.
“Recent research has confirmed that greenwashing is rife among ‘sustainable’ investment funds marketed in Europe — funds which despite their name are heavily exposed to fossil fuel expansion,” ClientEarth lawyer Robert Clarke told Mongabay in an email. “This is undoubtedly a systemic issue for the integrity of financial markets in the EU and globally, but it also raises legal issues for specific investment funds and their management companies.”
Twelve of BlackRock’s funds hold investments in one or more of the world’s biggest fossil fuel companies, such as TotalEnergies, ExxonMobil, Shell, BP, Eni, Chevron, ConocoPhillips and Equinor, according to ClientEarth’s complaint. “Their development activities make these companies some of the most climate-damaging in the world,” it said.
ClientEarth noted that two of BlackRock’s funds, the BGF Sustainable Global Infrastructure Fund and the BGF Sustainable Energy Fund, are in breach of the European Union’s Sustainable Finance Disclosure Regulation requirements.
The NGO said it will also notify the European Securities and Markets Authority (ESMA), an independent regulatory agency of the EU. ESMA’s guidelines on funds, ClientEarth said, address the risk that “misleading sustainability disclosures” could lead to greenwashing, and focus on particularly funds that use “sustainability-related terms in their names.”
Asked to respond to ClientEarth’s claims, a BlackRock spokesperson told Mongabay via email, “Our 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.”
Clarke said BlackRock’s response shows the asset manager has “a different understanding of the applicable legal rules.”
“The marketing of these funds breaches regulation that requires investor communication to be ‘clear, fair and not misleading’ for the reasons set out in the complaint,” he said.
ClientEarth said it hopes the AMF will clarify “that investment in fossil fuel expansion is not ‘sustainable’” and for BlackRock to change its language when marketing its investments.
BlackRock is the largest asset management company in the world and the second-largest institutional investor in fossil fuels. So “enforcement against BlackRock by the French financial watchdog in response to this complaint, and/or a change in marketing practices by BlackRock, could have a knock-on effect on conduct by other investment managers and in other financial markets,” Clarke said.
Banner image by Rhett A. Butler/Mongabay.
