ClientEarth Takes Action Against BlackRock for Alleged Greenwashing
In a significant move aimed at holding financial institutions accountable for their sustainability claims, the environmental law NGO ClientEarth has filed a formal complaint against BlackRock, the world’s largest asset management firm. The complaint, submitted to France’s financial markets authority (AMF), alleges that BlackRock has misrepresented multiple retail investment funds as “sustainable,” despite their substantial investments in fossil fuel companies.
The Allegations
ClientEarth’s complaint centers on 18 actively managed retail investment funds offered by BlackRock in France, all of which include the term “sustainable” in their names. However, the NGO argues that these funds have material exposure to fossil fuel companies that are either developing new fossil fuel projects or failing to phase out fossil fuel production in alignment with the Paris Agreement’s temperature goals. This contradiction raises serious questions about the integrity of the funds’ marketing and the broader implications for sustainable investing.
Robert Clarke, a lawyer at ClientEarth, emphasized the systemic nature of the issue, stating, “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.” This situation not only undermines the credibility of sustainable finance but also poses legal challenges for the investment funds and their management companies.
BlackRock’s Investment Practices
The complaint highlights that twelve of BlackRock’s funds are invested in some of the world’s largest fossil fuel companies, including TotalEnergies, ExxonMobil, Shell, BP, Eni, Chevron, ConocoPhillips, and Equinor. ClientEarth argues that the activities of these companies contribute significantly to climate change, making their inclusion in “sustainable” funds highly misleading.
Furthermore, two specific funds— the BGF Sustainable Global Infrastructure Fund and the BGF Sustainable Energy Fund—are cited as being in violation of the European Union’s Sustainable Finance Disclosure Regulation. This regulation mandates transparency and accuracy in sustainability claims, underscoring the importance of truthful marketing in the financial sector.
Regulatory Implications
In addition to filing the complaint with the AMF, ClientEarth plans to notify the European Securities and Markets Authority (ESMA). The ESMA has established guidelines that address the risks associated with misleading sustainability disclosures, particularly for funds that incorporate “sustainability-related terms” in their names. This step indicates a broader regulatory scrutiny of the practices employed by asset managers in Europe.
BlackRock’s Response
In response to the allegations, a BlackRock spokesperson stated that the firm manages its funds in accordance with their investment objectives, which are clearly disclosed in each fund’s prospectus and on BlackRock’s website. The spokesperson asserted that BlackRock’s sustainable funds comply with applicable regulations governing sustainable investing.
However, Clarke contends that BlackRock’s interpretation of the legal framework differs from that of ClientEarth. He argues that the marketing of these funds violates regulations that require investor communications to be “clear, fair, and not misleading.” This discrepancy highlights the ongoing debate over what constitutes “sustainable” investing and the responsibilities of asset managers in this context.
The Path Forward
ClientEarth hopes that the AMF will clarify that investments in fossil fuel expansion cannot be classified as “sustainable.” The NGO is advocating for BlackRock to revise its marketing language to reflect a more accurate representation of the funds’ environmental impact.
Given BlackRock’s status as the largest asset management company globally and its position as the second-largest institutional investor in fossil fuels, the outcome of this complaint could have far-reaching implications. Clarke notes that enforcement actions by the French financial watchdog or changes in BlackRock’s marketing practices could influence the conduct of other investment managers and financial markets at large.
Conclusion
The complaint filed by ClientEarth against BlackRock serves as a crucial reminder of the importance of transparency and accountability in sustainable investing. As the demand for environmentally responsible investment options continues to grow, the financial sector must ensure that its marketing practices align with the realities of its investment strategies. The outcome of this case could set a precedent for how sustainability is defined and communicated in the investment world, potentially reshaping the landscape of responsible finance for years to come.