German manager commits to challenging fossil fuel expansion
Union Investment, one of the largest managers in the German institutional market has taken further steps to cut back fossil fuel exposure across its investment fund range
The Frankfurt-based active manager, which holds some €479bn in assets announced this week that it intends to ramp up the pressure on oil and gas giants who expand their oil and gas production by more than 10%.
From 2030 on, Union intends to divest from all fossil fuel producers who do not demonstrate a credible net zero strategy. This would apply across its entire fund range.
The new investment guidelines, which will enter into force in January 2025 will also see the manager divesting from firms with more than 5% exposure to tar sands production.
From April next year on, the firm’s ESG fund range will no longer invest in oil and gas producers. This would require Union Investment to divest from firms such as Shell, Total and BP as well as European gas producer Wintershall Dea.
The new investment guidelines come as the EU has finalised its new investment fund labels aimed at tackling greenwashing in investment funds. The European Securities and Markets Authority (ESMA) revealed in May that funds which deploy the ESG label in their product branding must meet ESG objectives for at least 80% of their assets. However, it did put in place an outright ban on fossil fuel investment for ESG funds.
Fund managers marketing to the continent have been given nine months to comply with the new rules.
Earlier this year, research by Follow the Money revealed that 4 out of 10 funds branded as ESG funds marketed to European investors remain invested in fossil fuels.
Union Investment’s new guidelines were welcomed by German campaign group Urgewald, but the group warned that there were still important loopholes: “By focussing on gas producers, Union Investment sets an important signal. However, Union Investment is focusing solely on production, even though the construction of LNG terminals and pipelines also influences the production of oil and gas. Another point of criticism is that while the refusal to grant discharge is a clear message to the management of oil and gas companies, this step can only be effective with a critical mass of other investors” the group stressed.
Due to the focus on oil production, Union Investment can continue to invest in companies like Venture Global LNG and Sempra Energy, who do not extract oil and has but continue to play a crucial role in manufacturing and transport of fossil fuel assets.
