Who gains from saving nature
Ledger 1 : 33 — For each dollar financing nature-based solutions in 2023, about $33 financed activities harmful to nature. (UNEP)
Cases / Finance, funds and markets · Global · 2018–2026

Sustainable-labelled funds: assets, renaming under the EU fund-name rules, fees and impact studies

Nature's voice · report
3,901 billion US dollars were raised in my name. When it was measured, no benefit to me was found.
Did nature suffer? Not measured. Accounts differ ↓
Not on record
  • The record does not name which of my species, waters, soils or forests were harmed.
What the record lacks: 4 none on record · 8 insufficient · 2 not measured · 3 disputed · 1 unclear See the gaps
Accounts of the harm differ
Whether renamed funds changed what they hold
  • Government and regulators ESMA: Reported that 57% (530) of the 924 funds in the 25 largest managers' notices updated their investment policy, and that name changes alone cut fossil-linked exposure of "sustainable" and environmental-term funds from EUR 17 billion to EUR 6 billion. European Securities and Markets Authority
  • Researchers Morningstar: Said "most of the funds that have changed names have not changed their underlying strategy." Morningstar Sustainalytics
Whether sustainable funds change what companies do
  • Researchers Heath, Macciocchi, Michaely and Ringgenberg: Found that SRI funds do not significantly change firm behaviour and little evidence that they use shareholder proposals to try. IDEAS/RePEc
  • Researchers Berk and van Binsbergen: Found no detectable effect on the cost of capital and recommended that investors "invest and exercise their rights of control to change corporate policy" instead of divesting. Stanford University Graduate School of Business, via IDEAS/RePEc
  • Researchers Kölbel, Heeb, Paetzold and Busch: Found the impact of shareholder engagement well supported in the literature, capital allocation only partly supported and indirect impacts unsupported. SAFE Leibniz Institute for Financial Research

Funds with an environmental, sustainability or impact claim held USD 3.901 trillion at the end of 2025, according to Morningstar. After the EU fund-name guidelines, 65% of funds named in the 25 largest EU managers' notices changed name, ESMA reported, and peer-reviewed studies found little effect of such funds on company behaviour.

USD 3.901 trillionAssets of funds with an ESG, sustainability or impact claim, end of 2025
Morningstar, 7,064 funds; the definition is based on the fund prospectus and, in Morningstar's words, not on any regulatory framework.

Status As of October 2026: the EU fund-name guidelines have applied to all funds since 21 May 2025; Morningstar counted USD 3.73 trillion in sustainable-labelled funds at the end of Q2 2026; the latest penalty in the sources reviewed is A$7.3 million against Fiducian on 11 August 2026.

What?
Funds that claim an ESG, sustainability or impact focus held USD 3.901 trillion at the end of 2025 (Morningstar). After the EU fund-name guidelines, 65% of the funds named in the 25 largest EU managers' notices changed their names; peer-reviewed studies found no significant effect of such funds on company behaviour or the cost of capital, and regulators in the United States and Australia have penalised sustainability claims by fund managers. European Securities and Markets Authority
Where?
Funds worldwide, with Europe holding USD 3,342 billion across 5,231 funds and the US USD 368 billion across 454 funds at the end of 2025 (Morningstar); regulatory outcomes in the United States and Australia. Morningstar Sustainalytics
When?
From 2018, when Morningstar began tracking, to October 2026; the EU fund-name guidelines applied from 21 November 2024 (new funds) and 21 May 2025 (existing funds). European Securities and Markets Authority
Who?
Gained
Lost
  • Investors in sustainable-labelled funds — Higher average expense ratio in the US: 0.50% at the end of 2022 against 0.37% for traditional peers (Morningstar) Mutual Fund Directors Forum
Harmed
None on record
Why?
ESMA found that funds with a higher fossil-fuel compliance gap were more likely to rename, and that adding ESG terms to a name had attracted more inflows; Baker, Egan and Sarkar wrote that demand is largely driven by the ESG label itself. European Securities and Markets Authority
How?
Funds changed their names, in 61% of renamings removing all ESG terms, or updated their investment policies (57% of funds in ESMA's sample); regulators penalised statements that did not match fund processes or holdings. European Securities and Markets Authority
6 of 6 questions answered from the record

What happened

The record, in order.

Morningstar's Global Sustainable Fund Flows series counts open-end funds and ETFs whose prospectus claims an ESG, sustainability or impact focus, and notes that this definition "is not based on any regulatory framework". On its count such funds held about USD 600 billion at the end of 2018, USD 1.65 trillion at the end of 2020 (as reported by IFA Magazine) and USD 3.901 trillion across 7,064 funds at the end of 2025. In 2025 the funds recorded net outflows of USD 84 billion, the first annual outflow since tracking began in 2018, in a year when the whole fund universe took in about USD 1.7 trillion; Morningstar said stock market appreciation supported the rise in assets in the fourth quarter of 2025. Morningstar named BlackRock (about USD 453 billion), Amundi (about USD 216 billion) and UBS (USD 208 billion) as the three largest managers of such funds at the end of 2025. The Global Sustainable Investment Alliance said in its 2024 review, published in November 2025, that it no longer had sufficient data to give an aggregate value of the sustainable investment universe.

The EU's fund-name guidelines applied to new funds from 21 November 2024 and to existing funds from 21 May 2025. ESMA reported on 20 January 2026 that the notices of the 25 largest EU managers mentioned 924 funds, of which 65% (600) changed their name and 57% (530) updated their investment policy. Of the funds that renamed, 61% removed all ESG terms and 21% moved to a lower category of term. Funds in the sample using ESG terms fell from about 4,000 in the first quarter of 2024 to about 3,300 in the third quarter of 2025. ESMA found that name changes alone cut the exposure of "sustainable" and environmental-term funds to fossil-fuel activity above the Paris-Aligned Benchmark thresholds from EUR 17 billion to EUR 6 billion, and that funds which kept ESG terms cut that exposure by 40%. Each additional percentage point of fossil "compliance gap" raised the probability of a rename by about 1.8 points, and funds of US-headquartered managers were about twice as likely to rename. An earlier ESMA study (April 2025) found that funds adding ESG terms to their names attracted 9% more inflows, and 16% more for environmental terms. Morningstar counted close to 1,600 funds, about 29% of its sustainable fund coverage universe (a European universe of about 5,500 funds at the start of 2024) and more than USD 1 trillion in assets, renamed since the beginning of 2024, and said most had not changed their underlying strategy. Under the UK Sustainability Disclosure Requirements, labels became available from 31 July 2024; Morningstar counted 121 funds that had adopted a label at the end of December 2025, of which 107 held a combined USD 62 billion.

On fees, Morningstar's US fund fee study put the asset-weighted expense ratio of sustainable funds at 0.61% at the end of 2020 (against 0.41%, which Wealth Professional described as the figure across the whole US fund space), 0.55% at the end of 2021 (against 0.39% for traditional peers) and 0.50% at the end of 2022 (against 0.37% for traditional peers); Morningstar called the difference a "greenium". Raghunandan and Rajgopal (Review of Accounting Studies, 2022) compared ESG and non-ESG funds run by the same institution in the same year, 2010 to 2018, and found that ESG funds obtained lower stock returns and charged higher management fees, and that their portfolio firms had significantly more violations of labour and environmental laws. Baker, Egan and Sarkar estimated that the premium investors paid for an ESG index fund went from 3 basis points in 2019 to 17 in 2020 and to minus 33 in 2023 in the revised version of their paper, and wrote that demand was largely driven by the ESG label itself. On holdings, InfluenceMap (August 2021) found that 421 of 593 broad ESG funds (71%) and 72 of 130 climate-themed funds (55%) had negative Paris-alignment scores. More than half of ESG-named funds in ESMA's sample had no exposure above the Paris-Aligned Benchmark thresholds.

Three peer-reviewed studies looked at what such funds change. Berk and van Binsbergen (working paper abstract; published in the Journal of Financial Economics, 2025) found no detectable effect on the cost of capital of firms added to or removed from the FTSE USA 4Good index and wrote that "instead of divesting, socially conscious investors should invest and exercise their rights of control to change corporate policy". Kölbel and co-authors (Organization & Environment, 2020) found the impact of shareholder engagement well supported in the literature, capital allocation only partly supported and indirect impacts without empirical support. Heath, Macciocchi, Michaely and Ringgenberg (Review of Finance, 2023) found that SRI funds do not significantly change firm behaviour and wrote: "SRI funds are not greenwashing, but they are impact washing."

Regulators have penalised sustainable-fund claims in the United States and Australia. The SEC fined BNY Mellon Investment Adviser USD 1.5 million (23 May 2022), Goldman Sachs Asset Management USD 4 million (22 November 2022) and WisdomTree USD 4 million (21 October 2024), and ASIC won an A$7.3 million penalty against Fiducian Investment Management Services in the NSW Supreme Court (11 August 2026). Penalties against DWS, Invesco, Mercer, Vanguard Australia and Active Super are recorded in separate records. The SEC's Climate and ESG Enforcement Task Force was reported disbanded in September 2024, and the SEC issued a notice withdrawing its 2022 ESG disclosure proposal on 12 June 2025, and the sources reviewed record no SEC ESG-fund enforcement in 2025 or 2026. The UK anti-greenwashing rule (ESG 4.3.1R) has applied since 31 May 2024.

  1. 2018Morningstar's count of sustainable-labelled fund assets at about USD 600 billion
  2. 2020Fund assets at USD 1.65 trillion at year end, per Morningstar as reported by IFA Magazine
  3. 2021Morningstar counts global sustainable fund assets at USD 2.74 trillion at the end of December
  4. 2022SEC penalises BNY Mellon Investment Adviser, USD 1.5 million (23 May)
  5. 2022SEC penalises Goldman Sachs Asset Management, USD 4 million (22 Nov)
  6. 2024UK sustainability labels available to firms (31 Jul)
  7. 2024EU fund-name guidelines become applicable (21 Nov)
  8. 2024SEC penalises WisdomTree, USD 4 million (21 Oct)
  9. 2024SEC Climate and ESG Enforcement Task Force reported disbanded (Sep)
  10. 2025EU fund-name guidelines: 21 May deadline for implementation, as Morningstar describes it
  11. 2025SEC issues notice withdrawing its 2022 ESG disclosure proposal (12 Jun)
  12. 2025Morningstar records the first annual outflow from sustainable-labelled funds, USD 84 billion; assets USD 3.901 trillion
  13. 2026ESMA publishes its analysis of the naming guidelines (20 Jan)
  14. 2026ASIC wins an A$7.3 million penalty against Fiducian (11 Aug)
  15. 2026Morningstar counts USD 3.73 trillion at the end of Q2

What was said

Claims, in the words of those who made them.

“is not based on any regulatory framework”

“most of the funds that have changed names have not changed their underlying strategy.”

“no longer have sufficient data to provide an aggregated value of the size of the global sustainable investment universe.”

“ESG funds (i) obtain lower stock returns but (ii) charge higher management fees.”

“ESG funds' portfolio firms have significantly more violations of labor and environmental laws.”

“driven by the ESG label itself”

“the impact on the cost of capital is too small to meaningfully affect real investment decisions.”

“is unlikely to drive a deeper transformation without additional policy measures.”

“SRI funds do not significantly change firm behavior.”

Heath, Macciocchi, Michaely and Ringgenberg, Review of Finance · 2023 · IDEAS/RePEc

“SRI funds are not greenwashing, but they are impact washing.”

Heath, Macciocchi, Michaely and Ringgenberg, Review of Finance · 2023 · IDEAS/RePEc

“ESG claims must be backed by robust systems, oversight and governance.”

Where accounts differ

Each party's account, side by side, with its source. The record does not settle these points; it shows them.

Whether renamed funds changed what they hold
Government and regulators
ESMA

Reported that 57% (530) of the 924 funds in the 25 largest managers' notices updated their investment policy, and that name changes alone cut fossil-linked exposure of "sustainable" and environmental-term funds from EUR 17 billion to EUR 6 billion.

European Securities and Markets Authority
Researchers
Morningstar

Said "most of the funds that have changed names have not changed their underlying strategy."

Morningstar Sustainalytics
Whether investors pay more for sustainable funds
Researchers
Morningstar (US fee study)

Put the asset-weighted expense ratio of sustainable funds at 0.50% at the end of 2022 against 0.37% for their traditional peers and called the difference a "greenium".

Mutual Fund Directors Forum
Researchers
Raghunandan and Rajgopal

Found that ESG funds charge higher management fees than non-ESG funds run by the same institution in the same year (2010 to 2018).

Harvard Law School Forum on Corporate Governance
Researchers
Baker, Egan and Sarkar

Revised their estimate of the premium for an ESG index fund to 3 basis points (2019), 17 (2020) and minus 33 (2023), and found it remained positive in Europe.

National Bureau of Economic Research
Whether sustainable funds change what companies do
Researchers
Heath, Macciocchi, Michaely and Ringgenberg

Found that SRI funds do not significantly change firm behaviour and little evidence that they use shareholder proposals to try.

IDEAS/RePEc
Researchers
Berk and van Binsbergen

Found no detectable effect on the cost of capital and recommended that investors "invest and exercise their rights of control to change corporate policy" instead of divesting.

Stanford University Graduate School of Business, via IDEAS/RePEc
Researchers
Kölbel, Heeb, Paetzold and Busch

Found the impact of shareholder engagement well supported in the literature, capital allocation only partly supported and indirect impacts unsupported.

SAFE Leibniz Institute for Financial Research

How it looked

What was shown, beside what was recorded.

Shown

  • Fund names, prospectuses and marketing carrying environmental, sustainability or impact terms; Morningstar counted 7,064 funds with such a claim at the end of 2025.
    Fund managers (as classified by Morningstar) · Morningstar Sustainalytics
  • BNY Mellon Investment Adviser represented or implied in various statements that all investments in its funds had undergone an ESG quality review, according to the SEC.
    BNY Mellon Investment Adviser (SEC finding) · US Securities and Exchange Commission
  • Three WisdomTree ESG ETFs stated they would avoid fossil fuels and tobacco, according to the SEC.
    WisdomTree (SEC finding) · US Securities and Exchange Commission
  • Fiducian's Diversified Social Aspirations Fund made ESG statements for which the manager had no reasonable grounds, according to ASIC.
    Fiducian Investment Management Services (ASIC outcome) · Australian Securities and Investments Commission

Recorded

  • Morningstar: global sustainable fund assets were roughly USD 600 billion at the end of 2018 and USD 3.901 trillion across 7,064 funds at the end of 2025.
    Morningstar Sustainalytics
  • Morningstar: global sustainable fund assets were USD 3.5 trillion at the end of Q1 2026 and an estimated USD 3.73 trillion at the end of Q2 2026 (China's assets at the March figure).
    Morningstar Manager Research
  • Morningstar global sustainable fund assets at earlier year-ends: USD 1.65 trillion at the end of 2020 (as reported by IFA Magazine).
    IFA Magazine
  • Morningstar global sustainable fund assets at earlier year-ends: USD 2.74 trillion at the end of 2021.
    Morningstar Manager Research
  • Morningstar global sustainable fund assets at earlier year-ends: USD 2.5 trillion at the end of 2022 (as reported by Sustainable Investor).
    Sustainable Investor
  • Morningstar global sustainable fund assets at earlier year-ends: USD 3 trillion at the end of 2023.
    Morningstar Manager Research
  • Morningstar global sustainable fund assets at earlier year-ends: USD 3.2 trillion at the end of 2024, up 8% on the year (as reported by ESG Today).
    ESG Today
  • Morningstar net flows: USD 38 billion in 2024 (as restated in the Q4 2025 report); minus USD 84 billion in 2025, the first year of annual redemptions since it began tracking in 2018, with passive funds almost minus USD 35 billion (their first annual outflow) and active funds a record minus USD 49 billion, while the global open-end fund and ETF universe took in almost USD 1.7 trillion.
    Morningstar Sustainalytics
  • Morningstar net flows in 2026 (Q2 excluding China): an estimated plus USD 3.7 billion in Q2 2026 and plus USD 800 million in Q1 2026 after restatement.
    Morningstar Manager Research
  • Morningstar, end 2025: Europe held USD 3,342 billion across 5,231 funds (86% of assets) and the US USD 368 billion across 454 funds; US flows were minus USD 21 billion in 2025, the third consecutive year of net outflows, with nine launches and 97 closures.
    Morningstar Sustainalytics
  • Morningstar notes that a large part of the Q3 and Q4 2025 European outflow was redemptions by large UK institutional investors moving from pooled ESG funds into bespoke ESG segregated mandates; Morningstar does not collect data on segregated mandates, so money moving out of its fund universe is recorded as a net outflow.
    Morningstar Sustainalytics
  • Global Sustainable Investment Alliance totals: USD 22.89 trillion (2016), 30.7 trillion (2018), 35.3 trillion (2020) and 30.3 trillion (2022, after a US methodology change). Its 2024 review, in place of an aggregate, cites Morningstar data showing USD 16.7 trillion of funds disclosing responsible and sustainable investment approaches, up 49% in two years and 27% of the fund market against about 3% in 2018.
    Global Sustainable Investment Alliance
  • ESMA, 20 January 2026: of 924 funds in the 25 largest EU managers' notices, 600 (65%) changed name and 530 (57%) updated their investment policy; 61% of those renaming removed all ESG terms; exposure above Paris-Aligned Benchmark fossil thresholds of "sustainable" and environmental-term funds fell from EUR 17 billion to EUR 6 billion through name changes alone; funds that kept ESG terms cut it by 40%.
    European Securities and Markets Authority
  • ESMA, April 2025 study (as summarised in its 2026 slides): funds adding ESG terms to their names attract 9% more inflows, and 16% more for environmental terms.
    European Securities and Markets Authority
  • Morningstar: close to 1,600 funds, or 29% of its sustainable fund coverage universe (a European universe of about 5,500 funds at the start of 2024) and more than USD 1 trillion in assets, were renamed since the beginning of 2024.
    Morningstar Sustainalytics
  • Morningstar, UK Sustainability Disclosure Requirements labels: 121 funds had adopted a sustainability label at the end of December 2025, of which 107 held a combined USD 62 billion (assets unavailable for 14 funds).
    Morningstar Sustainalytics
  • Morningstar US fund fee study, asset-weighted expense ratio of sustainable funds: 0.61% at the end of 2020 against 0.41% (Wealth Professional described 0.41% as the figure across the whole US fund space).
    Wealth Professional
  • Morningstar US fund fee study: asset-weighted expense ratio of sustainable funds 0.55% at the end of 2021 against 0.39% for their traditional peers; Morningstar said the "greenium" had reached its lowest level on record in 2021 (as reported by Wealth Professional).
    Wealth Professional
  • Morningstar US fund fee study: asset-weighted expense ratio of sustainable funds 0.50% at the end of 2022 against 0.37% for their traditional peers, which Morningstar described as a "greenium" paid by shareholders of sustainable funds.
    Mutual Fund Directors Forum
  • Baker, Egan and Sarkar: the first version estimated that investors paid about 20 basis points more a year for an ESG index fund, of which intermediaries captured about 5.9 basis points; the revised version gives the premium as 3 basis points (2019), 17 (2020) and minus 33 (2023), with a larger swing for institutional investors and a premium that remains positive in Europe.
    National Bureau of Economic Research
  • Ceccarelli, Ramelli and Wagner (Review of Finance 28(1), 2024): after Morningstar released carbon risk metrics and the "Low Carbon Designation" label in April 2018, funds receiving the designation had flows about 36 basis points higher each month through the end of 2018, per the journal's digest of the paper.
    Review of Finance
  • InfluenceMap (August 2021): 723 equity funds with more than USD 330 billion were assessed; 421 of 593 broad ESG funds (71%) and 72 of 130 climate-themed funds (55%) had negative Paris-alignment scores. InfluenceMap (September 2019): 118 climate-themed funds (about USD 18 billion) had thermal-coal reserve exposure "roughly the same" as the iShares MSCI World fund.
    InfluenceMap
  • Berk and van Binsbergen (published in the Journal of Financial Economics 164, 2025; working paper abstract): firms added to or removed from the FTSE USA 4Good index showed "no detectable effect on the cost of capital".
    Stanford University Graduate School of Business, via IDEAS/RePEc
  • Crossref lists Berk and van Binsbergen, "The impact of impact investing", as Journal of Financial Economics volume 164, article 103972, issued February 2025.
    Crossref
  • Berk and van Binsbergen, in a January 2025 post, described their paper as forthcoming in the Journal of Financial Economics and wrote that divestment in secondary markets is unlikely to materially change the way companies operate.
    Harvard Law School Forum on Corporate Governance
  • Kölbel, Heeb, Paetzold and Busch (Organization & Environment 33(4), 2020): the impact of shareholder engagement is "well supported in the literature"; the impact of capital allocation only partially; indirect impacts lack empirical support.
    SAFE Leibniz Institute for Financial Research
  • SEC v BNY Mellon Investment Adviser (23 May 2022): penalty USD 1.5 million plus cease-and-desist and censure, no admission; period July 2018 to September 2021; the SEC found the adviser "represented or implied in various statements that all investments in the funds had undergone an ESG quality review."
    US Securities and Exchange Commission
  • SEC v Goldman Sachs Asset Management (22 November 2022, release 2022-209): penalty USD 4 million; period April 2017 to February 2020; policy failures in two mutual funds and one separately managed account strategy; the SEC found "personnel completed many of the ESG questionnaires after securities were already selected for inclusion."
    US Securities and Exchange Commission
  • SEC v WisdomTree (21 October 2024, order, Investment Advisers Act Release No. 6753 and Investment Company Act Release No. 35364): penalty USD 4 million; March 2020 to November 2022; three ESG ETFs that, the SEC found, were misstated as not investing in companies involved in fossil fuels and tobacco held companies in "coal mining and the transportation of coal, natural gas extraction and distribution, and the retail sale of tobacco products"; the funds held approximately USD 27 million, 38 million and 73 million in assets at 31 March 2020 and were liquidated on 5 February 2024.
    US Securities and Exchange Commission
  • ASIC v Fiducian Investment Management Services (NSW Supreme Court, 11 August 2026, ASIC 26-191MR): penalty A$7.3 million, ASIC's fourth greenwashing civil-penalty outcome; between October 2019 and May 2024 the Diversified Social Aspirations Fund's underlying funds held investments in companies that derived revenue from fossil fuels, and the Court found the manager "did not have reasonable grounds to make the ESG Statements".
    Australian Securities and Investments Commission
  • UK FCA anti-greenwashing rule (ESG 4.3.1R), in force from 31 May 2024 (guidance FG24/3): any reference to the sustainability characteristics of a product or service must be consistent with those characteristics and fair, clear and not misleading.
    Financial Conduct Authority
  • SEC Climate and ESG Enforcement Task Force: reported in September 2024 to have been disbanded (Crowell & Moring, citing a Bloomberg Law report).
    Crowell & Moring LLP
  • SEC notice of 12 June 2025 withdrawing its 2022 proposal on ESG disclosures for investment advisers and investment companies (Latham & Watkins).
    Latham & Watkins LLP
  • SEC Investment Company Names Rule amendments, 14 March 2025: compliance date for larger fund groups moved from 11 December 2025 to 11 June 2026, and for smaller groups from 11 June 2026 to 11 December 2026.
    US Securities and Exchange Commission

In nature's name

What was promised in nature's name, the money that moved, and what was measured.

Money moved in nature's name

WhatKindAmountPeriod
Assets of funds with an ESG, sustainability or impact claim (assets, not a flow)
Funds worldwide (Morningstar)
Morningstar Sustainalytics		Raised$3901bnend of 2025
Net flows into such funds (outflow)
Funds worldwide (Morningstar)
Morningstar Sustainalytics		Raised$-84000m2025
Assets of the 107 UK-labelled funds with assets reported
UK-labelled funds (Morningstar)
Morningstar Sustainalytics		Raised$62bnend of 2025
SEC penalty
BNY Mellon Investment Adviser
US Securities and Exchange Commission		Penalty$1.5m2022
SEC penalty
Goldman Sachs Asset Management
US Securities and Exchange Commission		Penalty$4m2022
SEC penalty
WisdomTree
US Securities and Exchange Commission		Penalty$4m2024
ASIC civil penalty
Fiducian Investment Management Services
Australian Securities and Investments Commission		Penalty7.3m AUD2026

What was measured

Measured; no benefit found

Peer-reviewed studies by independent academics measured the effect of sustainable funds on company behaviour and the cost of capital and found no significant change (Heath et al. 2023; Berk and van Binsbergen 2025); Kölbel et al. (2020) found shareholder engagement supported in the literature and indirect impacts without empirical support. These studies measure company behaviour and financing, not outcomes in nature, and no study in the sources reviewed measures an outcome in nature.

Effect of SRI funds on firm behaviour
No significant change
Heath, Macciocchi, Michaely and Ringgenberg, Review of Finance 27(6), 2023 IDEAS/RePEc
Effect on the cost of capital
No detectable effect
Berk and van Binsbergen (working paper abstract; published in the Journal of Financial Economics 164, 2025) Stanford University Graduate School of Business, via IDEAS/RePEc
Violations of labour and environmental laws at portfolio firms of ESG funds
Significantly more
Raghunandan and Rajgopal, Review of Accounting Studies, 2022 Harvard Law School Forum on Corporate Governance

Operation Ongoing · Morningstar counted 7,064 such funds at the end of 2025 and USD 3.73 trillion in assets at the end of Q2 2026. Morningstar Manager Research

Findings on record

  • Court or regulator ruling US Securities and Exchange Commission (2022-05-23) · SEC v BNY Mellon Investment Adviser, release 2022-86: “represented or implied in various statements that all investments in the funds had undergone an ESG quality review.” US Securities and Exchange Commission
  • Court or regulator ruling US Securities and Exchange Commission (2022-11-22) · SEC v Goldman Sachs Asset Management, release 2022-209: “personnel completed many of the ESG questionnaires after securities were already selected for inclusion.” US Securities and Exchange Commission
  • Court or regulator ruling US Securities and Exchange Commission (2024-10-21) · SEC v WisdomTree, order IA-6753 / IC-35364: “misstated to the ESG Funds' board of trustees ("Board") and investors that the ESG Funds would not invest in companies” US Securities and Exchange Commission
  • Court or regulator ruling Supreme Court of New South Wales (ASIC civil-penalty proceeding) (2026-08-11) · ASIC v Fiducian Investment Management Services, ASIC 26-191MR: “did not have reasonable grounds to make the ESG Statements.” Australian Securities and Investments Commission
  • Official audit European Securities and Markets Authority (2026-01-20) · Analysis of the impact of the fund naming guidelines, ESMA50-1949966494-3872 European Securities and Markets Authority
  • Peer-reviewed study Heath, Macciocchi, Michaely and Ringgenberg, Review of Finance 27(6):2057–2083 (2023) · Review of Finance 27(6):2057–2083: “SRI funds do not significantly change firm behavior.” IDEAS/RePEc
  • Peer-reviewed study Berk and van Binsbergen, Journal of Financial Economics 164, 103972 (Crossref record); wording from the working-paper abstract (2025) · "The impact of impact investing", Journal of Financial Economics 164, 103972: “the impact on the cost of capital is too small to meaningfully affect real investment decisions.” Stanford University Graduate School of Business, via IDEAS/RePEc
  • Peer-reviewed study Raghunandan and Rajgopal, Review of Accounting Studies (2022) · Review of Accounting Studies 2022, doi:10.1007/s11142-022-09693-1: “ESG funds' portfolio firms have significantly more violations of labor and environmental laws.” Harvard Law School Forum on Corporate Governance
  • Peer-reviewed study Kölbel, Heeb, Paetzold and Busch, Organization & Environment 33(4):554–574 (2020) · Organization & Environment 33(4):554–574: “is unlikely to drive a deeper transformation without additional policy measures.” SAFE Leibniz Institute for Financial Research

Who gained

Money that reached nature, beside money that stayed elsewhere.

Reached nature or the ground

Not published
No figure published.

Gained elsewhere

Not totalled
Assets of funds with an ESG, sustainability or impact claim (Morningstar)$3901bn
Window: end of 2025
USD 3.901 trillion across 7,064 funds.
Net flows into such funds (Morningstar)$-84000m
Window: 2025
First annual outflow since tracking began in 2018.
SEC penalty, BNY Mellon Investment Adviser$1.5m
Window: 2022
SEC penalty, Goldman Sachs Asset Management$4m
Window: 2022
SEC penalty, WisdomTree$4m
Window: 2024
ASIC penalty, Fiducian Investment Management Services—
Window: 2026
A$7.3 million.
Currency: USD · Window: Mixed — see each line. Figures cover different periods and are not compared as a ratio. * Estimate built from cited figures.

Responses on record

In court and with insurers

Every proceeding and every insurer decision on record.

Lawsuits and rulings

  1. 2022-05-23Claimant won$1.5m penalty
    SEC v BNY Mellon Investment Adviser
    US Securities and Exchange Commission (administrative order) · Regulatory · US Securities and Exchange Commission → BNY Mellon Investment Adviser

    Penalty of USD 1.5 million plus cease-and-desist and censure, no admission, for representing or implying that all investments in its funds had undergone an ESG quality review (July 2018 to September 2021). US Securities and Exchange Commission

  2. 2022-11-22Claimant won$4m penalty
    SEC v Goldman Sachs Asset Management
    US Securities and Exchange Commission (administrative order) · Regulatory · US Securities and Exchange Commission → Goldman Sachs Asset Management

    Penalty of USD 4 million (release 2022-209) for policy failures in two mutual funds and one separately managed account strategy between April 2017 and February 2020; ESG questionnaires were completed after securities were already selected for inclusion. US Securities and Exchange Commission

  3. 2024-10-21Claimant won$4m penalty
    SEC v WisdomTree
    US Securities and Exchange Commission (order IA-6753 / IC-35364) · Regulatory · US Securities and Exchange Commission → WisdomTree

    Penalty of USD 4 million for three ESG ETFs that were said not to invest in fossil-fuel or tobacco companies but held companies in coal, natural gas and tobacco retail between March 2020 and November 2022; the funds were liquidated on 5 February 2024. US Securities and Exchange Commission

  4. 2025–2026-08-11Claimant wonAUD 7.3m civil penalty
    ASIC v Fiducian Investment Management Services
    Supreme Court of New South Wales · Civil · Australian Securities and Investments Commission → Fiducian Investment Management Services

    Penalty of A$7.3 million (ASIC 26-191MR), ASIC's fourth greenwashing civil-penalty outcome; the Diversified Social Aspirations Fund's underlying funds held companies with fossil-fuel revenue between October 2019 and May 2024 and the Court found the manager had no reasonable grounds for its ESG statements. Australian Securities and Investments Commission

Insurers

No insurer decision on record.

What nature saw

Outcomes measured on the ground, and nature's note.

Nature's report opens this page. Below: further outcomes measured on the ground.

Funds that renamed, 25 largest EU managers' notices (ESMA)
600 of 924 (65%)
57% (530) also updated their investment policy; 61% of those renaming removed all ESG terms
Fossil-linked exposure of "sustainable" and environmental-term funds above Paris-Aligned Benchmark thresholds (ESMA)
EUR 17 billion to EUR 6 billion
Through name changes alone; funds that kept ESG terms cut it by 40%
Effect of SRI funds on firm behaviour (Heath et al., 2023)
No significant change
Peer-reviewed study, Review of Finance
Effect on the cost of capital (Berk and van Binsbergen, 2025)
No detectable effect
Firms added to or removed from the FTSE USA 4Good index

What we don't know

Undisclosed, unproven, untried: recorded as data.
Court ruling existsOfficial audit findingPeer-reviewed findingClaim ruled misleading

Nature

  • Not measured Harm to nature: The record holds no measurement of harm to nature.
  • Disputed Whether renamed funds changed what they hold
  • Disputed Whether sustainable funds change what companies do

Money

  • None on record ASIC penalty, Fiducian Investment Management Services — A$7.3 million.

Accounts

  • Disputed Whether investors pay more for sustainable funds

Record

  • Unclear Unclear: the sources reviewed do not explain the fall in Morningstar's figure from USD 3.901 trillion at the end of 2025 to USD 3.5 trillion at the end of Q1 2026.
  • None on record Not on record: a Morningstar comparison of sustainable and conventional fund fees after 2022, a global estimate of total ESG fee revenue, year-by-year global fund counts for 2018 to 2023, and an exact global flow figure for 2023.
  • Insufficient Unconfirmed: Fitz Partners figures, as reported by Financial News, that European ESG equity funds earned just over USD 1 billion in management fees in 2024 and ESG bond funds USD 221 million; the scope of these figures is unclear.
  • Not measured Not measured: no study in the sources reviewed measures an outcome in nature for these funds; the studies cover company behaviour, cost of capital, flows, fees and holdings.
  • Insufficient Insufficient: no InfluenceMap or Sustainalytics climate-fund update after 2021 was found.
  • None on record None on record: an FCA enforcement action under the anti-greenwashing rule; fines by BaFin, AMF, AFM, CSSF or FINMA against asset managers; a Hong Kong SFC ESG-fund fine; an SEC ESG-fund enforcement action in 2025 or 2026.
  • Insufficient Unconfirmed: that the FCA does not publish a list of funds carrying UK labels.
  • Insufficient Unconfirmed: a secondary report of Berk and van Binsbergen cites a cost-of-capital effect of about 0.35 basis points; the paper's own wording is "no detectable effect on the cost of capital".
  • Insufficient Unconfirmed: a 2020 Morningstar headline, seen only as a headline, said "60% of ex-fossil funds have fossil fuel exposure."
  • Insufficient Unconfirmed: Morningstar net flows into global sustainable funds of USD 645 billion in 2021, and a fall of about 75% in 2022 that left flows positive; the Morningstar Q4 2021 and Q4 2023 reports opened give quarterly flows and year-end assets, not these annual figures.
  • Insufficient Unconfirmed: that, over the decade to 2022, fees charged by sustainable funds fell 35% and fees paid by their investors fell 48% (Morningstar US fund fee study, seen only in a search summary).
  • Insufficient Unconfirmed: that the German fine against DWS came from prosecutors.
  • None on record Not on record: Morningstar's own 2020 to 2022 US fund fee study documents were not available; the expense ratios are as reported by Wealth Professional and the Mutual Fund Directors Forum.

Did the harm stop?

No harm to nature is recorded in the sources reviewed for this case.

Who paid?

Investors in sustainable-labelled funds paid an asset-weighted expense ratio of 0.50% at the end of 2022 against 0.37% for traditional peers, according to Morningstar (0.55% against 0.39% at the end of 2021). The SEC and ASIC penalties in the sources reviewed were USD 1.5 million, USD 4 million, USD 4 million and A$7.3 million.

Sources

Voices on record: — Company or project✓ Government and regulators— Courts✓ Press and investigations✓ Communities and civil society✓ Researchers✓ Standard-setters and registries

Government and regulators

  1. Impact of the fund naming guidelines (webinar slides, ESMA50-1949966494-3872)
    European Securities and Markets Authority · 2026-01-20
  6. SEC Extends Compliance Dates for Amendments to Investment Company Names Rule
    US Securities and Exchange Commission · 2025-03-14

Press and investigations

Communities and civil society

  1. Global Sustainable Investment Review 2024, main report
    Global Sustainable Investment Alliance · 2025-11
  3. Morningstar Releases 2022 U.S. Fund Fee Study
    Mutual Fund Directors Forum · 2023-10-11

Researchers

  5. Global Sustainable Fund Flows: Q2 2026
    Morningstar Manager Research ·
  8. The Impact of Impact Investing (Stanford GSB Research Paper 3981)
    Stanford University Graduate School of Business, via IDEAS/RePEc · 2021-10

Standard-setters and registries

Connected cases

Related matters, and cases linked to this one through the same organisations, with the role each played in both.
Terms used on this page

Carbon and conservation finance

Carbon credit
A certificate representing one tonne of carbon dioxide (or equivalent) that a project says it reduced, avoided or removed. Buyers use credits to balance their own emissions in climate claims.
ESG
Environmental, social and governance criteria that investors and insurers use to screen companies and projects.

Insurance

Premium
The price paid for an insurance policy.

Institutions

SEC
The US Securities and Exchange Commission, which regulates securities markets and what companies tell investors.

Bonds and banking

Liquidation, insolvency, bankruptcy
Legal processes that apply when a company cannot pay its debts; its assets are sold and claims against it may go unpaid.

Law and courts

Trustees (natural resource)
Government agencies that act on behalf of the public to recover and spend damages for harm to natural resources.
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