ClientEarth challenges claims made by BlackRock in its sustainable funds

Not only are regulators clamping down on greenwashing but, as previously highlighted, ClientEarth, a non-profit international environmental law organisation, also has this issue squarely in its sights. ClientEarth submitted a Freedom of Information request to the FCA regarding the regulator's greenwashing investigations at the end of last year. As a result of that, the FCA recently confirmed it has one active case which has been open for over a year. Whilst the FCA has not been quick off the starting blocks, regulators around the globe are in full swing.

ClientEarth has now submitted a complaint against the world's largest asset management company, BlackRock, to the Autorité des Marchés Financiers (AMF) and intends to notify the European Financial regulator (ESMA).  The AMF is the financial regulator in France.  BlackRock looks after private individuals, pension funds, banks and others with a reported portfolio of US$9tn.  The published complaint refers to 18 actively managed retail investment funds labelled as "sustainable" by BlackRock in France.  ClientEarth has pointed out that these funds are at risk of greenwashing given they all contain over US$1bn inconsistent holdings in fossil fuel companies with over 96% in companies increasing fossil fuel activity.  ClientEarth expressed that investing in fossil fuel companies which are not phasing out production of fossil fuel in line with targets in the Paris Agreement cannot be classed as "sustainable".            

In July 2024, the AMF looked into over 50 sustainable thematic funds in the region of €64bn marketed in France to retail clients.  The AMF report concluded there were inadequacies, especially in relation to foreign funds marketed in France but not authorised by the AMF.  The AMF issued reminders of the regulatory requirements of thematic fund marketing.  It noted of particular importance is verifying that the information provided is accurate, clear and not misleading.  

Investors are increasingly interested in taking sustainability into account in their investment decisions and the AMF will no doubt be considering its options.  Whilst there has been no comment from the body as yet (ClientEarth report it has not even publicly confirmed their complaint), we expect a review is on the cards.  ClientEarth wants:

• enforcement so that "sustainable" funds are just that; 
• BlackRock to amend its marketing materials for the targeted investments or divest for consistency with sustainable portfolios; and  
• other investment managers to take this as a warning and ensure compliance with their "sustainable" funds.

Environmental claims are on the rise and nearly 2000 claims filed since the Paris Agreement was adopted in 2015 according to this report, "Global trends in climate litigation: 2024 snapshot", by the Grantham Research on Climate Change and the Environment.  With new anti-greenwashing rules and guidelines coming into effect, this is only going to increase further.