The most climate friendly funds set tight thresholds of fossil-fuel exposure for potential investments. They detail the fuels and activities excluded by the fund, and rule out investments in carbon-heavy industries and companies providing services to refineries.
These products also state that they are focused on positively investing in solutions to climate change. Other funds with similar branding don’t even mention fossil fuels, make vaguely worded environmental pledges, and can include holdings in companies linked to continuing fossil fuel production.
And there is little evidence that the new climate change disclosure legislations in the UK and Europe will sufficiently address this particular issue. This is all linked to a strong culture in the investment industry that ‘engagement’ rather than ‘divestment’ works.
What will this project try to achieve?
Ethical Consumer (EC) is launching an ongoing system to rate funds based on their commitment to tackling climate change and transitioning to the low carbon economy.
The tested analysis method considers fossil-fuel exclusions criteria and portfolio holdings, alongside other measures that fund managers have taken to address climate change, including investing in companies involved in developing climate change solutions.
The organisation will use the ratings system to drive transparency, highlight best practice and encourage sustainable fund managers to reduce their exposure to fossil fuels.
The five-star ratings will help retail investors to see at a glance whether a fund is fossil-fuel free. EC will use the findings to shift
the conversation towards divestment and away from solely engagement.
Who might be interested in this project?
Consumers, retail investors, fund managers, environmental campaigners, regulators, UK Parliament