Investment funds are responsible for substantial environmental and social impacts

Abstract

AbstractSustainable investing is under risk of being watered down by greenwashing given the lack of standardized and reliable indicators for measuring impact at financial product level. Here we propose 13 environmental and 13 social life-cycle-based, ready-to-use, and policy-relevant impact indicators that can be adapted for sustainability assessment of financial products. These indicators are aligned primarily with the EU Sustainable Finance Disclosure Regulation (SFDR) for investment funds. As practical application, we estimate the impacts of a sample of 230 self-labeled sustainable investment funds for all indicators. Their total estimated environmental impacts and social impacts are large and vary between 2.1 and 28.4 times the impacts associated with the consumption of a one million EU citizens, depending on the indicator. Moreover, we have found similar impact ranges within a sample of conventional funds, given the heterogeneity of funds. However, when comparing two funds that are equivalent sustainable/non-sustainable pairs, we find that the sustainable fund is better on specific impact categories, but not all of these, therefore hinting towards trade-offs in terms of impact categories also for sustainable funds.