After a series of cases of alleged greenwashing by asset managers, institutional investors comment on whether the industry is truly committed to sustainable investing

Cautious optimism

Rousseau Olivier2

Fonds de Réserve pour les Retraites (FRR)

Olivier Rousseau, member of the board

  • Assets: €26bn
  • Pension reserve fund
  • Location: Paris

In defence of asset managers that have been accused of greenwashing I would say that the allegations made against them suggest that they may have exaggerated their commitment to sustainability, which is bad indeed, but it does not mean that everything they do is wrong from a sustainability perspective.

At FRR, if during due diligence we find that an asset management company is pretending to be greener and more sustainable than it really is in our view, their evaluation will suffer. There will be cases where a company is convinced of their record on sustainability and rarer ones where there may be outright dishonesty, and we will try to differentiate between them, but ultimately the evaluation will reflect their record on sustainability and outright lies will mean exclusion, of course.

The swathes of rules implemented by regulators, at national and EU level, have the potential to facilitate greenwashing, because they are placing great demands on both managers and investors, but they are very useful to inform and protect non-professional investors. The problem I see is that regulation sometimes is moving faster than the availability and quality of the data and is being implemented despite a lack of agreement on methodologies. The processes of choosing the right methodology to measure carbon emissions, for instance, should require more trial and error.

“The swathes of rules implemented by regulators, at national and EU level, have the potential to facilitate greenwashing, because they are placing great demands on both managers and investors, but they are very useful to inform and protect non-professional investors”

Having said that, I see the regulation as more relevant to retail investors than institutions. Institutions are generally moving fast on their journey to climate neutrality, they tend to carry out in-depth research on managers and often have higher demands than the ones contained in the regulations. But it is unfortunate that regulation tends to crystallise some of the methodologies, despite a lack of agreement upon them. The intentions of regulators are excellent, but we have to be careful about not sterilising developments in methodologies by crystallising norms too early.

In 2014, in partnership with AP4, MSCI and Amundi we pioneered the design of low-carbon indices, an initiative which we are proud of. But such an approach is not always beyond reproach. For example, the indices ban or assign low weights to large emitters, which then end up in the hands of other shareholders. The reality is that decarbonising portfolios helps the green transition because it increases the cost of capital for the largest emitters. A best-in-class approach also does not totally exclude the best oil and gas companies that have truly embarked on the green transition, and may provide an incentive to the lower-rated ones to step up their transition plans in order to be included in the system. Furthermore, decarbonisation is an important risk-management tool, because it results in a lower exposure to the companies that will suffer most from the green transition and a higher carbon price.

On that note, I am reasonably optimistic about the direction of travel of the European oil and gas sector. Many companies are focusing increasingly less on exploration and are allocating some of their huge cash flows towards investment in renewable energy. They seem to have embarked on a genuine transition journey.

Governments need to up the ante on the green transition and urgently implement a more accurate carbon price.

Day of reckoning

Barron Victoria

BT Pension Scheme Management
United Kingdom

Victoria Barron, head of sustainable investment

  • Assets: £57bn (€68bn)
  • Manager of the BT Pension Scheme
  • Location: London

When it comes to accusations of greenwashing, if I was being generous, I would say that this is a fast-moving area with limited regulation, standardisation and changes in definition, which is creating a complicated picture.

If I was being less generous, I would say that the record inflows of money into funds with ESG, impact and sustainability labels have encouraged asset managers to be deliberately loose with their definitions.

As ever, the truth probably sits somewhere in the middle. Throughout my time in the industry, I have seen many examples of very good practice, but a minority of firms are potentially risking the reputation of the whole community.

The danger here is that if the asset management industry does not step up and clean up, there is a risk that asset owners will turn their back on these strategies altogether. This would be a big step backwards in better understanding financial risks and finding investment opportunities. It would also have a hugely detrimental impact on the environment and society as a whole. This is not in anybody’s interests.

At BTPSM we work with a small number of asset managers, with whom, over many years, we have built very deep relationships.

Whilst we are still on a learning curve, we’re working hard with them, so they understand our net-zero goal, our sustainable investment strategy and are clear on what we do and, more importantly, do not want.

“The danger is that if the asset management industry does not step up and clean up, there is a risk that asset owners will turn their back on these strategies altogether. This would be a big step backwards in better understanding financial risks and finding investment opportunities”

Lack of clarity from asset owners on their objectives can result in misunderstanding with asset managers. One person’s definition of sustainable is not necessarily another’s, so asset owners need to ask probing questions, make sure they really understand what they are being told and ask for proof points and evidence of claims. So, too, do the consultants. The time for sweeping generalisations is over.

Tighter regulation is also key to this. In the UK, the Stewardship Code is already demanding evidence to back up claims and the Sustainable Finance Disclosure Regulation (SFDR) will help to provide greater standardisation of what is and isn’t sustainable.

All of this will help give asset owners greater confidence because, ultimately, we all want to have greater awareness of ESG factors so we can better manage our risks and identify opportunities.

The day of reckoning is coming, and asset owners and managers have to mean what they say on sustainability.

Our goal is to influence



Hanna Kaskela, director, responsible investment & sustainability

  • Assets: €57.6bn
  • Finnish mutual pension insurance company
  • Location: Helsinki

We are aware of the allegations of greenwashing made towards certain companies and are following the outcomes of the investigations. On our part, we will start to review the climate-related actions across our investment value chain and we do not, for example, use counterparties for which fossil fuel companies form a significant part of the fees they generate from clients.

ESG should be implemented across every asset class and emissions should be calculated also across all asset classes. Not only some parts of the portfolio.

We do not make new investments in companies with coal-based operations accounting for more than 10% of their revenue, electricity generation or generation capacity. The exception to this general rule is companies that have a set science-based target of reducing emissions to help limit global warming to 1.5° Celsius.

We do not finance coal-based projects, nor do we invest in companies that are planning new coal-based investments. In addition, we do not invest in the tobacco industry and companies involved in the production and distribution of controversial weapons. We also have enhanced ESG monitoring for certain industries like alcohol. Of course, two fundamental tools at our disposal are engagement and voting.

Our plan is to engage companies that still use coal in order to accelerate the decommissioning of coal-based operations. Particularly in externally managed funds, our aim is to develop collaboration between investors as a tool for mitigating the effects of climate change. Our goal is to influence, independently and with other investors, how fund managers take climate aspects into account as part of their responsible investment practices.

With regard to regulation, we believe that all the labels that are proposed or implemented should be based upon scientific evidence.

“Our aim is to develop collaboration between investors as a tool for mitigating the effects of climate change. Our goal is to influence, independently and with other investors, how fund managers take climate aspects into account as part of their responsible investment practices”