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Climate funds study shows need for greater ESG scrutiny

Coal_workerMore than 100 climate-themed funds listed on global exchanges have approximately the same level of thermal coal exposure as the World MSCI Index of large cap equities, according to research from InfluenceMap.

The findings highlight the need for greater attention and supervision of climate-themed and broader environment, social and governance (ESG) investment in terms of advertising, marketing and portfolio construction.

The research from InfluenceMap analysed 118 funds with $18 billion in assets at a time of heightened investor scrutiny on the coal industry, which is under threat given its role in global temperature rises.

A particularly extreme example highlighted in the study came from Asia, where two funds marketed by Fullgoal Fund Management and Lion Fund Management contained thermal coal intensity 50 times higher than funds on the MSCI World Index of global large cap companies, InfluenceMap said in a statement.

Both funds have more than $100 million in assets under management and hold Chinese mining companies, Shaanxi Coal and Yanzhou Coal Mining.

"The IPCC's Global Warming of 1.5C report told us the role for thermal coal in our economies is strictly limited,” said Adrienne Buller, an analyst at InfluenceMap and author of the report.

“Certainly, it is surprising that several asset management groups think thermal coal companies have a place in any fund marketed to climate-concerned investors," added Buller.

On the other hand, some managers selling climate funds have actively worked to eliminate companies controlling fossil fuel reserves from their funds. The report highlighted Nordea, UBS, Pictet, Schroders and Franklin Templeton as leaders of these efforts.

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