The world of sustainable investing has seen a surge in popularity over recent years, driven by growing awareness of environmental and social responsibility. However, the reality behind many so-called “sustainable” funds has not always lived up to their marketing claims. Asset managers are now facing increasing scrutiny from regulators and campaigners over how they define and deliver sustainability in their investment practices.
The Problem with Greenwashing
Accusations of greenwashing—the practice of falsely promoting products as environmentally friendly—have plagued the investment sector. Some asset managers have been criticised for prioritising profits over genuine sustainability, packing their funds with companies contributing to pollution while branding them as “green” to attract investors.
This issue escalated to such an extent that global regulators have stepped in to protect consumers from being misled. Notable examples include:
- DWS, the investment arm of Deutsche Bank, fined $19 million by the US Securities and Exchange Commission (SEC) in 2023 for misstatements about its environmental, social, and governance (ESG) practices. Read the news article here
- Goldman Sachs Asset Management, which paid $4 million in 2022 to settle allegations of ESG violations. Read the news article here
Tightening Regulations
To curb these practices, regulators have introduced stricter rules. In Europe, the European Securities and Markets Authority (ESMA) has mandated that funds using terms like “sustainable” or “ESG” in their names must ensure at least 80% of their investments align with environmental characteristics. Similar rules are set to come into effect in the UK this December.
This has led to a significant shift in the industry. According to consultancy Broadridge, 79 funds in Europe dropped the term “sustainable” from their names in 2023, with another 26 doing so in 2024. In contrast, as recently as 2022, 99 funds added the word to capitalise on the growing demand for green investments.
Campaigners Call for Action
Environmental campaigners like ShareAction continue to criticise the asset management industry for failing to meet the urgency of the climate crisis. In a 2022 report, ShareAction highlighted the lack of clear targets to reduce emissions and the continued investment in fossil fuel projects by many major funds.
Abhijay Sood, senior research manager at ShareAction, noted that while asset managers wield significant power to drive change, many fail to take bold steps. Instead, they rely on optimistic projections, often ignoring the long-term risks of a hotter planet.
“Asset managers must use their influence to support a meaningful transition to a low-carbon economy,” Sood argues.
A Glimmer of Progress
Despite criticism, some progress has been made. Many asset managers have pledged to support global biodiversity initiatives like the Kunming-Montreal Global Biodiversity Framework, which aims to protect a third of the planet’s lands and seas by 2030. However, the framework is not legally binding, leading some to question whether it represents meaningful action or simply another form of greenwashing.
The Need for Accountability
While the Investment Association, representing UK asset managers, defends the industry’s role in economic transformation—highlighting the UK’s transition from coal to renewable energy—critics remain sceptical. Genuine sustainability requires more than good intentions and marketing; it demands transparency, measurable goals, and a commitment to long-term environmental and social outcomes.
Take Action
If you’ve invested in funds marketed as sustainable and feel they failed to deliver on their promises, you may be entitled to compensation. Misleading claims about sustainability can cause financial and ethical harm to investors.
Contact Claim My Loss today to explore your Sustainable funds Clams options. Our experts can help you navigate your case and ensure your voice is heard. Start your claim now to address your concerns and hold asset managers accountable.
