A new report by Climate Home exposes a contradiction in Europe’s sustainable investment efforts. Millions of dollars from EU “green” funds are being invested in major coal companies, undermining international agreements to reduce reliance on coal-fired power. The report reveals that European entities have invested over €65 million in coal firms across China, India, Indonesia, the United States, and South Africa. These companies are responsible for carbon emissions exceeding the combined emissions of four countries, contradicting the 2021 UN agreement to phase out unabated coal power.
The Climate Home report also found that these coal companies are expanding their operations, directly opposing sustainable investing goals and casting doubt on the environmental credentials of the involved “green” funds. These funds fall under Article 8 (light green) and Article 9 (dark green) of the EU’s Sustainable Finance Disclosure Regulation (SFDR), designed to guide investors towards environmentally conscious choices. However, the report suggests a case of “greenwashing,” where investments contradict their advertised sustainability goals.
The report details investments in coal mining giants like Coal India and China Shenhua, as well as coal power producers like NTPC. All these companies are planning significant expansions, according to the Global Coal Exit List, undermining global efforts to achieve net-zero emissions and stay within the Paris Agreement’s 1.5°C warming limit.
Financial institutions like Fideuram, AllianceBernstein, and Mercer hold stakes in these coal-intensive companies. Some “emerging markets” funds claiming to prioritize climate change prevention also invest in major coal producers. The European Commission is reviewing the effectiveness of the SFDR, considering potential reforms to prevent misleading labels like “sustainable” or “Paris-aligned” on funds with significant fossil fuel investments.
The future of the EU’s sustainable finance framework is uncertain, but this report highlights the challenges in ensuring “green” labels accurately reflect investment practices and raises questions about potential greenwashing within the system.
Sources:
https://www.eiopa.europa.eu/system/files/2023-06/EIOPA%20Progress%20Report%20on%20Greenwashing.pdf
