New European Union rules have forced many investment funds to drop certain terms from their names, such as “sustainable” or “climate”, if they cannot deliver on the promises made in those areas. It has to be said that the European guidelines do not oblige fund managers to build their portfolios more sustainably, notes the non-governmental organisation Finance Watch Germany (Finanzwende).

The organisations Urgewald and Facing Finance carried out a joint assessment of more than 15,000 European market funds and found that 674 funds whose previous names would (under the new rules) have required them to stop investing in fossil fuels were simply renamed.

“What we are seeing is not a harmless rebranding,” said Finance Watch representative Alison Schulz, stressing that: “Consumers had invested in these funds because they wanted to act sustainably. Simply changing a name is no substitute for real change; it abuses investors’ trust and diverts capital that ought in fact to be used for the ecological transformation.” The report says the organisations are now investigating whether funds that must give up their investments in hydrocarbons under the new rules had genuinely done so by May this year.

The new European Securities and Markets Authority (ESMA) guidelines on fund naming practices using ESG (short for Environmental, Social and Governance, often referred to as sustainability. In a business context, sustainability refers to a company’s business model, i.e. how its products and services contribute to sustainable development.) or other sustainability terms already entered into force in 2024. The aim of the guidelines is to ensure that investors are protected against unsubstantiated or exaggerated sustainability claims in fund names. The guidelines also give asset managers clear and measurable criteria for assessing whether they may use ESG or sustainability-related terms in fund names. “The guidelines stipulate that funds with certain sustainability terms in their names must exclude fossil fuel companies and must invest at least 80% of the fund’s assets in line with the strategy indicated in the name,” stated Finance Watch Germany.

Integrating finance into climate and energy policy has become a central task for governments around the world, because emission reduction plans require adequate funding. Investments that could jeopardise the achievement of climate targets need to be reduced. The fight against misleading sustainability claims at various levels is an essential part of the European Union’s strategy.

European “green” funds have been found to have invested more than US$33 billion in the largest oil and gas companies, despite fossil fuels being the main cause of the climate crisis. Some of these investment funds have used the brands Sustainable Global Stars and Europe Climate Pathway.

More than $18 billion went into the five biggest polluters: TotalEnergies, Shell, ExxonMobil, Chevron and BP. These companies took the top places in the 2023 Carbon Majors ranking for oil and gas production among shareholder-owned companies. Other investments made under the EU’s sustainable finance disclosure regulation (SFDR) included holdings in the US company Devon Energy and the Canadian fuel company Suncor, as revealed by an investigation by Voxeurop and the Guardian.

Investors claim that holding a stake in a company allows them to influence whether it meets its climate targets, yet none of the big oil and gas producers has plans that match international climate goals, and many companies have scaled their plans back over the past year, according to Carbon Tracker’s April report.

The investment firms with the largest stakes in fossil fuel companies within their green funds were JP Morgan, BlackRock and DWS in Germany. The investment firms have not breached the SFDR rules, which do not explicitly rule out holding stakes in some fossil fuel companies. Campaigners said that changes are needed to avoid misleading people.

“For a fund that calls itself “green”, investments in the largest fossil fuel companies should be regarded as a red line,” says Giorgia Ranzato, sustainable finance manager at Transport & Environment (T&E). “Since the major oil companies are not making a meaningful contribution to the energy transition, any green fund investment in such companies is essentially a pretence of acting in an environmentally friendly way. To combat this phenomenon effectively, T&E and other organisations are calling for a substantial revision of the SFDR.

“It is outrageous that banks and asset managers invest billions in the largest fossil fuel companies under the pretext of “green investments”, when what we need is to accelerate investment in zero-carbon and low-carbon energy, carbon efficiency and carbon removal technologies,” stressed Richard Heede of the Climate Accountability Institute.

BlackRock spokesperson: “BlackRock funds are managed in accordance with their investment objectives, which are clearly set out in each fund’s prospectus and on the BlackRock website. Our sustainable funds are managed in line with the applicable rules governing sustainable investment. For investors whose objective is decarbonisation, we offer a range of products that provide such exposure.”

Representatives of the asset manager Robeco said that the Sustainable Global Stars fund would delete the word “sustainable” from its name. The representative said that the fund’s CO₂ footprint “is 20% better” than the market index and that the company has “productive and intensive engagement” with TotalEnergies.

The investigation analysed the ownership of publicly traded fossil fuel companies included in the Carbon Majors report in the final quarter of 2024, using the London Stock Exchange’s data and analytics platform. It found that “green” funds had invested US$33.5 billion in 37 large fossil fuel companies.

The investigation found that in March 2025, funds with “green” keywords in their names had invested more than US$1 billion in the shares of the five fossil fuel giants.

• Legal & General Investment Management (LGIM)’s Europe Climate Pathway fund had invested US$88 million in Shell, BP and TotalEnergies. In total, LGIM held US$210 million in “green” funds.
• The Robeco Sustainable Global Stars fund had invested $40 million in TotalEnergies. In total, Robeco held $207 million in these funds.
• Another fund, State Street’s World ESG, had invested $43 million in all five of the largest oil companies combined. ESG is a label for funds that promote environmental, social and governance objectives. In total, State Street Global Advisors UK held $243 million in “green” funds.

The deadline for applying the new guidelines expired on 21 May. BlackRock and JP Morgan Asset Management announced in March and April respectively that they would remove the words “sustainable” and “ESG” from the names of some funds. Campaigners said they could have acted sooner. TotalEnergies stated that the company supports the goals of the Paris Agreement and that its strategy is consistent with global warming of less than 2 °C. Shell declined to comment on the situation, while other fossil fuel companies reportedly did not respond to requests for comment.