Eight of the 10 Biggest U.S. Sustainable Funds Are Invested in Oil-and-Gas Companies
Funds
with a focus on socially responsible investing are enjoying a record year of
inflows. But many such portfolios aren’t as clean as investors might expect.
Eight
of the 10 biggest U.S. sustainable funds are invested in oil-and-gas companies,
which are regularly slammed by environmental activists, according to a review
of the funds’ public disclosures.
ESG
funds, which broadly market themselves as trying to invest in companies with
strong environmental, social and governance practices, have taken in a record
$13.5 billion of net new money from investors in the first three quarters of
the year, according to Morningstar (ticker: MORN).
Although
most of the top funds exclude gun makers, casino operators and tobacco
companies, they have been slow to reduce their exposure to fossil fuels.
That
can sometimes seem at odds with the language funds include in their
prospectuses.
For
instance, BlackRock (BLK) says its iShares ESG MSCI USA ETF aims to track an
index of companies with “positive environmental, social and governance
characteristics.” The fund includes Exxon Mobil (XOM), which is awaiting a
ruling in a trial involving allegations that it misled investors about how it
accounted for climate-change regulations. A spokesperson for the oil giant says
the allegations in the lawsuit are baseless.
Vanguard Group’s FTSE Social Index Fund is meant to track an index excluding companies with “significant controversies regarding environmental pollution or severe damage to ecosystems.” Both that fund and another large ESG fund operated by Xtrackers include Occidental Petroleum (OXY), which in 2015 paid Peruvian indigenous villagers an undisclosed sum to settle a suit accusing it of contaminating the Amazon (AMZN).