Funds marketed as ‘sustainable’ hit by cross-border reality check

Hardly any sustainable funds would consistently be able to market themselves as such in the U.K., the U.S. and the European Union as watchdogs in the three jurisdictions implement divergent anti-greenwashing rules, according to a fresh study based on more than 18,000 investment products.

Research by Clarity AI, a sustainability technology platform whose customers include BlackRock, Invesco, and MetLife, found that only 4% of funds with the word sustainability or some version of it in their names actually comply with all current and planned requirements set by authorities in the three jurisdictions.

The findings offer an initial glimpse of how emerging regulatory frameworks are likely to affect the industry. That’s as the U.K. starts building out its own labeling system for funds claiming to target environmental, social and governance goals that contains a number of key differences from the Sustainable Finance Disclosure Regulation enforced in the EU over two years ago. The differences between the EU and the U.S. are at least as big.