Green funds impact on environment marginal - Greenpeace
The green investments that are meant to channel funds to economic activities that help protect the environment are barely different from conventional ones, environmentalist pressure group Greenpeace said on Monday, and more work is needed for green finance to really make a change on business.
The real economic impact of most sustainable investment funds, including those in Luxembourg, was marginal at best, according to a study carried out for Greenpeace by two Switzerland-based consulting groups.
Heavily touted labels such as 'green' often amounted to 'greenwashing', the group said, a term used to refer to traditional activities marketed as being good for the environment - in nod to the whitewashing of criminal money.
Only last week, Luxembourg's association of the fund industry, ALFI, published a report on how ESG (environmental, social and governance criteria) funds achieved hit a record € 1.1 trillion in Europe as more than half of investors' money went into funds with sustainability criteria.
ALFI's report highlighted Luxembourg - Europe's largest fund management centre - as the biggest hub, with sustainable funds accounting for €371 billion at the end of 2020 and capturing 44% of total net flows across Europe.
But sustainable funds showed no significant advantage over conventional funds when it comes to environmental and climate-related activities, the Greenpeace study into capital allocation of the funds found.
"It seems that sustainability funds overall only have a significant impact on investments when it comes to major environmental controversies or specific activities such as cement production and the armaments industry," Greenpeace said in a summary of the study. But that was not the case for the overall impact of portfolios on climate and sustainability.
A lack of data meant the data had to be read with caution. "Companies do not fully report relevant, encompassing and reliable data," the study said.
A lack of transparency and regulation as to the criteria defining the sustainability impacts was another problem. New EU regulations seen as a means of closing the gap also had shortcomings, the study said.