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'Green' funds shown to herd less, cutting climate shock risk - EU watchdog
(Reuters, 17 Mar 2021) European Union securities watchdog has made a first attempt to assess vulnerabilities to climate-related financial risks, concluding that funds investing in polluting companies are more exposed.
Funds investing in "brown" or polluting companies would be hit far harder than environmentally-friendly "green" funds in a climate-related market shock, the European Union's securities watchdog said on Wednesday in its first study of its kind.
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, the European Securities and Markets Authority (ESMA) said.
"This suggests greater concentration risks existing across funds whose portfolios contain more polluting assets," ESMA said.
ESMA published what it described as a first attempt to assess vulnerabilities to climate-related financial risks using data from 23,965 EU-based funds worth 10.7 trillion euros ($12.7 trillion).
"Within the European financial sector, investment funds are more exposed to climate-sensitive economic sectors than banks, insurers and pension funds. However, few investment fund climate-related financial risk assessments have been conducted," ESMA said in its latest summary of market risks.
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Reuters, 17 Mar 2021: 'Green' funds shown to herd less, cutting climate shock risk - EU watchdog
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