EU’s green fund invested in fossil fuels: Investigation

An international investigation has revealed that European investment funds branded as “green” under the EU’s Sustainable Finance Disclosure Regulation (SFDR) are holding more than $33.5 billion in fossil fuel stocks, including major oil and gas companies like ExxonMobil, Shell, BP, Chevron, and TotalEnergies.

Despite their eco-friendly branding, such as Sustainable Global Stars and Europe Climate Pathway, these funds collectively held over $18 billion in the top five shareholder-owned polluters.

The funds are registered under SFDR’s Articles 8 and 9, which were designed to promote environmental or sustainable investment goals but do not explicitly prohibit fossil fuel holdings.

Among the biggest fossil fuel investors were JP Morgan Asset Management and its UK arm with $3.2 billion, DWS in Germany with $2.2 billion, and BlackRock Investment Management UK with $1.7 billion.

Fund names and marketing strategies are now facing growing scrutiny as new ESMA (European Securities and Markets Authority) guidelines, aimed at curbing greenwashing, come into effect on May 21, 2025.

“We need strict rules that ban investments in companies developing fossil fuels from any fund with an ESG-related description,” said Paul Schreiber of Reclaim Finance.

Campaigners argue the SFDR has failed to provide adequate safeguards, allowing firms to use ESG terminology while backing companies that are expanding fossil fuel operations.

One such example includes Legal & General Investment Management’s (LGIM) Europe Climate Pathway fund, which held $88 million in Shell, BP, and TotalEnergies.

Similarly, Robeco’s Sustainable Global Stars fund had $40 million in Total Energies and has since announced it will drop “sustainable” from the name. State Street Global Advisors UK's World ESG fund also held $43 million in oil majors.

A Carbon Tracker report from April noted that no major oil and gas company has business plans aligned with international climate targets, and several have weakened their commitments in the past year.

Still, investment managers claim that by maintaining stakes in these firms, they can push for improved climate policies from within.

Critics remain skeptical. “For a fund claiming to be ‘green’, holding investments in major fossil fuel companies should be a red line,” said Giorgia Ranzato, sustainable finance manager at Transport & Environment (T&E).

Though ESMA’s new guidelines are non-binding, they give national regulators the authority to demand transparency from asset managers and to sanction misleading environmental claims.

These rules also introduce standards for “transition funds,” which must demonstrate clear and measurable paths toward environmental improvement.

Responding to the investigation, BlackRock stated that its sustainable funds comply with all applicable regulations and that investment goals are fully disclosed.

However, the firm, along with JP Morgan Asset Management, has already announced plans to strip ESG-related terms from several fund names.

As regulators brace for the implementation of the new rules, critics argue that the SFDR must undergo further reform to exclude fossil fuel investments entirely from funds marketed as sustainable.

The findings arrive amid increasing public scrutiny over corporate climate pledges and the integrity of sustainable finance.