NGOs Call for Fossil Fuels to Be Excluded from Sustainable Investment Labels

Non-governmental organisations (NGOs) and professional associations have called on the European Union to prevent fossil fuel developers from being classified as sustainable investments, urging stricter safeguards as part of any reform of the EU’s green finance transparency framework.

On Tuesday, over 120 signatories — including Reclaim Finance, financial institutions, and legal experts — addressed an open letter to Brussels, emphasising the need to curb greenwashing in financial markets.

“If the European Commission truly wants to tackle greenwashing in the financial sector, then it must at the very least exclude fossil fuel expansion from the entire range of sustainable fund categories,” said Paul Schreiber of Reclaim Finance.

The Sustainable Finance Disclosure Regulation (SFDR), introduced in 2021, currently sets out three categories to help investors assess the sustainability of financial products:

The European Commission is expected to propose revisions to the SFDR later this year, amid concerns that the current categories are too vague and open to misuse.

Calls for Reform

• NGOs argue that fossil fuel developers should never qualify for any sustainable investment label.
• Financial regulators and sector authorities have urged a thorough review of SFDR categories to ensure clarity and accountability.
• Earlier this year, the European Securities and Markets Authority (ESMA) mandated that funds using terms like “ESG” or “sustainable” must exclude companies whose revenues derive more than 1% from coal or 10% from oil.

The push comes amid growing scrutiny of greenwashing practices, where financial products are marketed as environmentally friendly without meeting robust sustainability standards.