BlackRock greenwashing case tests enforceability of sustainable fund label rules

NGO ClientEarth has lodged a formal greenwashing complaint against BlackRock in France, arguing that the firm is investing into fossil fuel expansion through funds marketed as ‘sustainable’. 

The complaint has been presented to the Autorité des Marchés Financiers (AMF), which regulates the financial sector in France. In it, ClientEarth argues that 18 of BlackRock’s funds marketed as “sustainable” in France have collectively invested over US$1 billion in fossil fuel companies such as TotalEnergies, Shell, BP, Chevron, Conoco Phillips and Equinor – the majority of which are developing new projects and expanding production capacity.

“We know that investors in France and elsewhere want to take sustainability into account in their investment choices – including fossil fuel expanders in ‘sustainable funds’ stops them doing that and undermines the integrity of the market for sustainable financial products,” ClientEarth said in a statement.

Sustainable fund labels and fossil fuels

Early in 2024, the French government ruled that funds bearing its ‘socially responsible investment’ (ISR) label would no longer be allowed to invest in companies engaged in any new fossil fuel development from 2025.

This is one of the strictest definitions of sustainable finance to date, and was expected to lead to billions of euros of divestments over the course of this year – made worse by the fact that even fossil fuel companies that had previously committed to capping production are backtracking on that promise. 

(BP, which is widely considered as one of the more sustainably-minded oil and gas producers, scrapped all plans to reduce oil output this October.)

Additionally, new guidelines from the EU’s financial sector regulator, the European Securities and Markets Authority (ESMA) also state that funds with any sustainability, environmental or impact-related terms in their names must exclude investment in fossil fuel companies. These will come into force on November 21, 2024.

ClientEarth complaint to 'set a new standard'

With its complaint against BlackRock, ClientEarth is testing the enforceability of these new sustainable fund labelling and marketing rules for the first time.

“If we have an encouraging result, it could set a new standard for investment funds when it comes to both fossil fuel financing and sustainable finance,” the NGO adds.

ClientEarth hopes that the case will be taken seriously by authorities as proof that sustainable fund labelling legislation is enforceable, forcing BlackRock and other asset managers to either change the language they use in marketing or divest their “sustainable funds” away from fossil fuels. 

“This is a systemic issue. We want other investment managers to heed the warning of this complaint against BlackRock, and for regulators around the world to pay attention to how investment companies are marketing their own 'sustainable' funds,” the statement concludes.