Climate Funds and Fossil Fuels

An InfluenceMap Report

September 2019

The case for closer oversight of the ESG fund industry

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See coverage in Financial Times, CityWire, City AM, Funds Europe and IPE

A basket of 118 climate-themed funds listed on exchanges around the world and with $18Bn in assets under management actually contains roughly the same aggregate intensity of exposure to thermal coal reserves in constituent companies as the iShares MSCI World Index Fund, and is comparable to that of the wider EU-based fund universe. This is just one of several anomalies uncovered by forensic analysis of this segment of the ESG fund management sector by UK think tank InfluenceMap.

  • The ESG (environment-social-governance) fund sector is a fast-growing area in financial markets. Morningstar estimates that assets in ESG themed mutual funds now exceed $1 trillion, while a 2019 BNP Paribas survey found 75% of asset owners invest in such funds. In light of this growth, there is considerable anticipation from a range of stakeholders, not least policy makers in the EU, that ESG funds will both meet buyers’ expectations and drive genuine impacts in the real economy. This is particularly true of climate-themed funds, which form the subject of this research.

  • The report identifies 118 climate-themed funds with an aggregate AUM of US$18Bn and examines the presence of fossil fuel reserves owned by the companies held by these funds. As a comparative indicator between funds of differing size, the analysis uses Thermal Coal Intensity (TCI) and total Fossil Fuel Intensity (FFI) metrics. While fossil fuel companies are not necessarily barred from climate funds for legal or other reasons, purchasers of such funds would likely expect these intensity metrics to be minimized in a product marketed under a climate theme.

  • At the extreme end, two funds (each with over $100Mn in AUM) marketed by Asia-based Fullgoal and Lion Fund Management companies were found to have TCI figures of 38,000 and 26,000 tons CO2/$Mn AUM respectively through holdings of Chinese mining companies like Shaanxi Coal and Yanzhou Coal Mining. This coal intensity is over 50 times higher than shown by funds based on the MSCI World Index of global large cap equities. The research also identifies two State Street funds marketed as "fossil fuel reserves free" and based on MSCI indices which have stakes in major energy and mining companies active in thermal coal, including RWE, Vale and Sasol.

  • On the other end, many asset managers selling climate funds appear to have actively eliminated companies controlling fossil fuel reserves from their funds. These are led by BNP Paribas, with an aggregate $2.1Bn AUM in climate-themed funds, Finland's Nordea ($1.6Bn), as well as European players Franklin Templeton, UBS, and Pictet, all with $500Mn or more in climate funds.

  • The research on climate funds highlights the need for greater oversight of the ESG sector. There remains huge variation in the terms used to market funds as climate related including "low carbon", "climate aware", and "fossil fuel free". Clear discrepancies between these labels and fund contents (for instance, the presence of coal mining companies in "fossil fuel reserves free" funds) indicate that more stringent advertising standards may be pertinent for such funds.

  • The research examined only those funds marketed with a climate-themed name, many of which appear to be passive in portfolio management strategy. It is noted that many funds focused on climate impact, such as Legal & General’s Future World Fund, remain intentionally invested in fossil fuel companies and pursue active engagement with these companies to drive impact. Future research should explore the complex matter of how climate (and ESG) funds can materially impact and drive positive change in the real economy via engagement with companies active in the economy.

Link to online spreadsheet with full fund data

About InfluenceMap

InfluenceMap is a non-profit think tank providing objective and evidence-based analysis of how companies and financial institutions are impacting the climate and biodiversity crises. Our company profiles and other content are used extensively by a range of actors including investors, the media, NGOs, policymakers, and the corporate sector. InfluenceMap does not advocate or take positions on government policy. All our assessments are made against accepted benchmarks, such as the Intergovernmental Panel on Climate Change. Our content is open source and free to view and use (


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