A tool to validate a fund's environmental, social and governance credentials has been launched for investors.
Impact Cubed's validator tool allows investors to test whether a fund's name or ESG approach is backed by objective data on ESG, climate, or impact.
A suite of climate tools also provide access to Impact Cubed’s proprietary data on climate risks and opportunities, both physical and transition climate risks.
Arleta Majoch, COO at Impact Cubed, said its data gave a "different view on ESG and impact data for portfolios.
"Providing factual data and full transparency has been Impact Cubed’s hallmark since its start, and we are now seeing the SEC and European Commission set the same expectations for managers and investors.”
She said there was now more than $2.7trn in ESG assets but greenwashing was rife, calling conventional ESG scores "subjective" and rating schemes "opaque".
Impact Cubed promises to "maximise objectivity" in its reporting and measures a fund's impact, alongside risk and return.
Investor appetite for ESG investing has not waned despite a challenging year of volatile returns and money being pulled from the funds.
Boring Money's Sustainable Investing Report 2022 found appetite in sustainable investing was consistently high despite investor sentiment being low.
But it also detected an “awful lot of confusion and continued growing scepticism about greenwashing from advisers and investors,” according to founder Holly Mackay, who blamed “misaligned expectations as much as any wrongdoing by product manufacturers.”
Regulators have already stepped in to root out greenwashing with enforcement actions.
The US Securities and Exchange Commission, for instance, has fined BNY Mellon’s investment adviser division $1.5mn for allegedly misstating and omitting information about the ESG credentials of the funds that it managed, the FT reported in May.
Mackay said things go wrong when people look into funds and find things they don’t expect. She said engagement and transition was becoming more popular but investors needed to know what’s going on.
“It just needs a couple of lines of positioning. It’s a question of rethinking what info do investors really need, what do they want to know..and make sure to talk to those points," she said.
Data from Morningstar shows August saw the first month of net outflows from UK sustainable funds since March 2020, with £199m being pulled from the funds. This was after flows deteriorated from February.
The assets are having a difficult year for performance. Research by Bowmore found in July that the higher a fund’s ESG rating the worse its returns were over the year to June 22.
The bad performance was largely down to the underperformance of certain sectors seen as more ESG-friendly, while sectors such as commodities, oil and gas, mining and defence saw bumper returns this year.
The Financial Conduct Authority meanwhile is preparing to consult on new investment labels, grouping ESG strategies under clearly defined headings, to make it easier for investors to understand what they are buying.
