Activists Register Greenwashing Accusation Against BlackRock in Regulatory Body
In a significant development, investment giant BlackRock has found itself in the crosshairs of environmental advocacy group ClientEarth, who have filed a complaint with the French financial regulator, Autorité des marchés financiers (AMF), accusing the firm of greenwashing.
The complaint, based on research conducted by Reclaim Finance, flags 18 actively managed retail investment funds in France and across Europe that are branded as "sustainable" but collectively hold more than $1bn of fossil fuel investments. According to ClientEarth, BlackRock's labeling of these funds as "sustainable" is a form of greenwashing, a practice that may be misleading to consumers, investors, or other market participants.
This is the first greenwashing complaint against a financial institution that ClientEarth has filed. Laura Clarke, CEO of ClientEarth, has stressed the need for further enforcement from financial regulators to ensure investment firm funds labelled 'sustainable' are in fact sustainable and not contributing to climate breakdown.
The European Securities and Markets Authority (ESMA) 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."
The practice of greenwashing is managed and enforced differently by each EU national regulator, with the French Regulator AMF being one of them. If an asset manager is found to be engaging in greenwashing, AMF is authorised to issue fines, public warnings, or take further enforcement action.
BlackRock's spokesperson stated that its sustainable funds are managed in line with applicable regulations governing sustainable investing. However, the complaint alleges that BlackRock is marketing funds as "sustainable" that are invested in fossil fuel companies.
The German Federal Financial Supervisory Authority (BaFin) has also received a similar complaint against BlackRock, and it can investigate the accusations, impose fines, and enforce compliance measures to ensure truthful sustainability claims.
Clarke also emphasized the importance of investment managers heeding 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.
It's important to note that, for the time being, funds with a sustainable label do not necessarily have to avoid investments in fossil fuels. Funds labelled as Article 6 or Article 8 funds must have a certain percentage of assets deemed sustainable in their portfolio, according to ESMA, but these funds can still invest in fossil fuels.
The complaint could potentially set a precedent for greenwashing cases in the EU. EU financial market regulation is predominantly in the hands of individual national regulators, with the US and UK having introduced greenwashing regulation for financial markets.
Australian regulators have already taken action against greenwashing, ordering Mercer Superannuation fund to pay a A$11.3m penalty due to misleading sustainability claims in its superannuation investment options.
Individual funds have between 1 and 27% exposure to fossil fuel assets, according to Reclaim Finance. This highlights the need for clearer and stricter regulations to ensure that funds marketed as sustainable actually align with their stated goals.
As the world moves towards a more sustainable future, it's crucial that investors can trust the labels placed on their investment options. The complaint against BlackRock serves as a reminder for all investment managers to be transparent about their investment strategies and to prioritise sustainability in their operations.
