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‘Green’ funds shown to herd less, cutting climate shock risk -EU watchdog
03/17/2021 Since 2 months

Funds investing in “brown” or polluting companies would be hit far harder than environmentally-friendly “green” funds in a climate-related market shock, according to the European Union’s securities watchdog.
Brown funds spread investments over a large number of the same companies, while green funds “herd” less, with each one investing in a different selection of companies, according to the European Securities and Markets Authority (ESMA). This suggests greater concentration risks existing across funds whose portfolios contain more polluting assets. In this respect, a preliminary climate risk scenario exercise showed that most brown funds’ losses ranged from 8% to 19% of affected assets, while losses in green funds ranged from 3% to 7%.
This has impacts in terms of the debates around Environmental, Social and Governance (ESG) ratings for investment funds, and the need for greater fund transparency on exposure to climate-sensitive sectors.

This post is also available in: Spanish Portuguese (Brazil)

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