Press release
ClientEarth complaint targets BlackRock over misleading sustainability claims
17 October 2024
- Complaint urges French financial watchdog to investigate BlackRock
- New analysis shows US firm’s ‘sustainable’ funds exposed to fossil fuel developers
- Greenwashing ‘rife’ in financial industry, misleading investors
PARIS – ClientEarth has urged the French financial regulator to investigate BlackRock over allegations of misleading investors, as analysis shows the US investment giant’s so-called “sustainable” funds have poured over a billion dollars into fossil fuel investments. [1]
The complaint filed this week with the Autorité des marchés financiers challenges the misnaming of investment funds as “sustainable”. The complaint questions the naming of BlackRock’s “sustainable” funds given their exposure to fossil fuel expanders, including ExxonMobil, Shell, TotalEnergies, Chevron and BP. [2]
ClientEarth lawyers argue that it is misleading and a breach of EU directives and regulations to name funds as sustainable when those funds invest in fossil fuel companies which are expanding or otherwise operating incompatibly with Paris Agreement temperature goals.
Building on analysis from French organisation Reclaim Finance, ClientEarth identified 18 actively managed retail investment funds marketed in France with ‘sustainable’ in their names which collectively hold more than US$1 billion of fossil fuel investment. The funds have fossil fuel exposures of between 1% and 27% of their assets under management, the majority of which is in companies expanding or developing new fossil fuel capacity.
ClientEarth lawyer Alex Bennett said:
“There is a high consumer demand for sustainable investment products, but it’s an open secret within the finance industry that greenwashing is rife.
“Our analysis shows that through BlackRock’s so-called ‘sustainable’ funds, investors are unwittingly being exposed to investments worth over a billion in fossil fuel companies, predominantly those expanding their fossil fuel businesses.
“Polls show that more than half of French adults take sustainability concerns into account when making investment choices, and that 75 percent say that the impact of investments on the environment is important. [3]
“These BlackRock funds are misleading investors through their inaccurate claims. Instead of investing sustainably, customers’ money is being used to provide huge amounts of capital in support of fossil fuel expansion.
“Ultimately, exaggerated sustainability claims allow these BlackRock funds to attract capital flows, crowding out genuinely sustainable products.”
BlackRock is the world’s largest investment management company, with a portfolio of USD$9 trillion. BlackRock has recently said it manages €41 billion for its customers based in France. [4]
The asset manager is the second largest institutional investor in fossil fuels overall, with an exposure of more than US$400 billion, and one of the asset managers with the highest share of ‘sustainable’ passive funds exposed to fossil fuel expansion. [5]
Strong enforcement needed
ClientEarth is calling for a strong enforcement response from the French regulator to ensure transparency and protection for investors.
It also calls on BlackRock to clean up its ‘sustainable’ funds’ by allocating away from fossil fuel expanders, or at the very least accept that it can’t keep calling these funds ‘sustainable’ while they direct funds to fossil fuel expansion or companies that fail to comply with the Paris Agreement temperature goals.
Lawyers also argued that any enforcement action or change in marketing of these funds in France should be replicated across European and UK markets.
The complaint highlights the recently released guidelines on fund naming from the European Securities and Markets Authority, which lawyers say supports their argument that it is inconsistent for ‘sustainable’ funds to invest in companies deriving significant revenue from fossil fuels. These guidelines are expected to apply to existing funds from 21 May 2025, and will provide yet another reason for investment funds to clean up their ‘sustainable’ funds.
In March this year, Reclaim Finance released market-wide research into the greenwashing of passive funds by asset managers. Reclaim Finance found that 72% of the BlackRock ‘sustainable’ passive funds for which data was available were exposed to fossil fuel expansion. [6]
The report also highlighted the lack of fossil fuel financing policies from BlackRock – the asset manager headquartered outside Europe with the biggest passive portfolio. [7]
In response to this report, media at the time quoted BlackRock as saying the asset manager had incorporated environmental, social and governance, or ESG, issues in investment decisions across all its active funds, stating: “We ask all companies to disclose how their business model will be compatible with the transition to a low-carbon economy.”
In response to the filing of the complaint, media reported BlackRock as saying: “BlackRock funds are managed in accordance with their investment objectives, which are clearly stated in each fund's prospectus and on the website.”
They also said they comply with all regulations on sustainable investment.
ENDS
Notes to editors:
A full Q&A document can be found here.
Footnotes:
[1] Data drawn from analysis of 18 Blackrock funds by Reclaim Finance based on Morningstar data as of 17 July 2024.
[2] Shell, ExxonMobil, Chevron, BP and TotalEnergies were found to be the top 5 biggest emitters of investor-owned companies between 2016 and 2022 according to InfluenceMap’s 2024 Carbon Majors database.
[3] Please see the results from a 2023 AMF survey available here.
[4] Please see: BlackRock en France | À propos de BlackRock | BlackRock
[5] Data underpinning Urgewald’s 2024 Investing in Climate Chaos analysis; “Unmasking Greenwashing” report by Reclaim Finance.
[6] See p. 10 and pp.14-15 of the “Unmasking Greenwashing” report by Reclaim Finance.
[7] See p.28 of the above report.
Analysis findings:
ClientEarth’s analysis identified multiple instances of misleading practices which include:
- Fossil fuel holdings which are incompatible with the ‘sustainable’ fund name;
- Breaches of the fund’s own promises to exclude certain investments from its portfolio, namely investments in thermal coal companies;
- Fund investment objectives which fail to explain that the fund will invest in companies at odds with being ‘sustainable’;
- Failure to meet European disclosure requirements under the Sustainable Finance Disclosure Regulation.
About ClientEarth
ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.