Highlights

• Fossil fuel investments should not appear in sustainable financial products, NGOs say.
• Over 120 organisations, including Reclaim Finance, urge EU safeguards against greenwashing.
• ESMA rules require funds using “ESG” labels to exclude companies with high coal or oil revenues.

NGOs and legal experts have called on the European Union to exclude fossil fuel investments from sustainable financial labels.

They say that companies investing in oil, gas, or coal should not appear in funds that are marketed as environmentally friendly.

In a joint open letter, over 120 signatories, including organisations such as Reclaim Finance and financial institutions, urged EU regulators to introduce safeguards against greenwashing.

Read More: What Are The Main Greenwashing Tactics Companies Use?

The European Commission plans to revise the Sustainable Finance Disclosure Regulation, which was introduced in 2021. Under this regulation, financial products are categorised into three with respect to sustainability.

The highest category needs a genuine sustainable investment objective, the second category applies to products that meet certain ESG criteria, and the third category includes funds that fail to meet these requirements.

Critics of the current system say the rules are vague, allowing some funds to market themselves as sustainable while still investing in fossil fuels.

Paul Schreiber of Reclaim Finance said that the Commission must exclude fossil fuel expansion from all sustainable fund categories to prevent misleading investors.

Earlier this year, the European stock market regulator, ESMA, directed funds using the terms “ESG” or “sustainable” in their names to remove companies whose revenues come more than 1 percent from coal or 10 percent from oil.

Also Read: Investigation Uncovers European Green Funds’ Hidden Activities

The debate over sustainable finance rules comes as investors increasingly seek opportunities that meet environmental, social, and governance (ESG) standards.

NGOs warn that without tighter rules, the credibility of the EU’s green finance framework could weaken, and investors may end up supporting projects that harm the environment.

Ends/

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