Lauren Gibbons
2 min read
A vast number of ESG ETFs and others removed sustainability-related terms from their names ahead of the European Securities and Markets Authority (ESMA) fund naming guidelines deadline on May 21.
A report by independent financial advocacy group Finanzwende, alongside Urgewald and Facing Finance stressed that the simple renaming of funds is evidence of fund promoters “evading responsibility through semantic tricks.”
The report analyzed 827 ETFs from a total of 15,222 funds. Of these ETFs, 529 included a term in their name suggesting alignment with the Paris-Aligned Benchmark (PAB) criteria, which means fossil fuel companies should be excluded.
Since ESMA published the fund-naming guidelines in May 2024, the research found 150 of these products have either removed or replaced sustainability-related terms.
Of the 150 ETFs that removed the term, 113 replaced it with a term that does not require the exclusion of fossil fuel companies and 37 removed the term entirely.
Advertisement: High Yield Savings Offers
Powered by Money.com - Yahoo may earn commission from the links above.Authors of the recent report warned the previous misalignment of fund names and corresponding baskets has created distrust within the industry.
Alison Schultz, consultant at Finanzwende said, "If a fund calls itself 'sustainable' while simultaneously investing in fossil fuel expansion, that is simply misleading. Such products should have been sanctioned long ago. The financial supervisory authority BaFin is called upon to continue to take consistent action in this regard."
Meanwhile, some professional investors have taken a more sanguine view.
Paris Jordan, head of Responsible Investing at Charles Stanley previously told ETF Stream, "At a broad level, this is a good step. It is positive because it means we will finally be speaking the same language and until now, we have not … in the long run, [the fund-naming guidelines] will help us move forward in the right direction."
ETF Stream has reported a regular cadence of issuers cutting the term out of their name in favor of more ambiguous terms, such as "scored and screened."
The largest relabelling sweep came from BlackRock, which removed the "ESG" label from its iShares MSCI ESG Screened UCITS ETF range and BSF Systematic ESG World Equity Fund, which contains 56 strategies housing $51 billion of assets under management.
This article was originally published at etf.com sister publication ETF Stream.
