Sustainable Funds

Foundations and disclosures of over 220 ESG funds

Sustainable financial products are on the rise. As investor demand is increasing, the importance of sustainably-oriented financial products is continuously growing and the rapid developments have led to a variety of environmental, social and governance (ESG) investment solutions. At the same time, increased regulatory obligations in the area and recent investigations by regulators around the world have brought attention to the risk of ‘greenwashing’ associated with greater transparency. In our study, the sustainability foundations and disclosures of more than 220 ESG funds were examined.

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Greening your financial products

Methodology

The study is based on the investigation of a representative sample of the publicly available official documentation of more than 220 ESG-related funds distributed across the EU from 20 providers based in Switzerland, the EU and internationally. Our analysis focused primarily on the legally disclosed information in the funds’ prospectuses, with complementing ESG information from factsheets and other publicly available relevant documents.

More than 220 ESG funds analysed

Providers from Switzerland, the EU and internationally

Based on publicly available legal documentation

«Our study has led to the conclusion that current sustainability disclosures for funds aren’t yet serving their purpose, which is to provide transparency and prevent greenwashing.»

Dr. Antonios KoumbarakisSustainability & Strategic Regulatory Leader, PwC Switzerland

Key findings

Our findings can be broken down into the following different key areas.

ESG product elements

  • Strong focus on light green products within the market
  • Most funds apply exclusions in combination with other ESG investment strategies
  • Three out of four light green products follow a broad-themed ESG approach without specifying the concise and concrete ESG characteristics
  • More thematic and impact investing in dark green products compared with light green products

ESG disclosure

  • Disclosures are often too general, vague and superficial
  • No, or weakened, ESG binding elements or KPIs in the majority of the sample, mainly as a result of the use of open-ended wording
  • More than 1/3 of the products do not indicate a minimum asset allocation to ESG investments

ESG data and ratings

  • Almost all institutions in scope rely on external data and rating providers
  • Merely 1 out of 3 products discloses the use of internal ratings

ESG investment strategies

  • General inconsistencies regarding the meaning of different investment strategies varying from bank to bank but also within the documentation of the same financial institution
  • Investment strategies often combine different approaches that are not necessarily well suited to achieving a true impact as crucial elements are missing

PwC framework against Greenwashing

PwC has designed a framework and a dedicated questionnaire for developing credible sustainable products, ensuring sufficient transparency and setting up effective monitoring and controls for the implementation of the ESG strategy. Our approach is based on our analysis and expertise, the various regulatory expectations and best market practices. We support our clients in their ESG transformation by helping them in every aspect, from the initial ESG product design to the disclosure of ESG elements.

PwC framework against Greenwashing

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Learn more about our findings and how PwC can support you to screen and green your product portfolio in order to achieve regulatory alignment and impact.

https://pages.pwc.ch/core-asset-page?asset_id=7014L0000004zIIQAY&embed=true&lang=en

Contact us

Dr. Antonios  Koumbarakis

Dr. Antonios Koumbarakis

Partner, Sustainability & Strategic Regulatory Leader, PwC Switzerland

Tel: +41 58 792 45 23

Sofia Jaccard

Sofia Jaccard

Senior manager, Sustainability & Strategic Regulatory, PwC Switzerland

Tel: +41 58 792 26 87