In a recent study by Goldman Sachs Group Inc., analysts discovered that fund managers are progressively including oil, gas, and mining stocks in portfolios registered as ESG. This shift aligns with a regulatory rethink on environmental, social, and governance strategies, allowing ESG investors to hold assets that may become sustainable in the future. The study coincides with criticisms from the US Republican Party, which has accused the ESG sector of blacklisting fossil fuels.
Goldman Sachs’ analysis, which focused on funds registered under the European Union’s Sustainable Finance Disclosure Regulation (SFDR)—the largest ESG investing rulebook—revealed that fund managers’ exposure to these sectors has increased over the past year. Among Article 8 funds, which manage over $7 trillion in assets, 51% now include oil and gas companies, up from 47% a year ago. For metals and mining, 46% of Article 8 funds hold these stocks, with 32% of Article 9 funds doing the same. This represents a 5% to 6% increase from last year.
Goldman Sachs analysts noted that while ESG funds remain generally underweight in commodities, there is growing openness to holding metals and mining companies. The upcoming overhaul of SFDR is expected to promote transition investing, allowing funds to hold previously controversial assets if they can demonstrate improvements in ESG profiles.
The study also highlights a growing recognition of uranium as a crucial mineral for the energy transition, given its role in nuclear energy. Despite recent signs of a wider ESG retreat, with $17 billion in outflows for Article 8 and 9 funds in the first half of 2024, assets in these categories are nearing all-time highs. Additionally, sustainable fixed-income funds saw significant inflows of $115 billion, contrasting with $75 billion for non-sustainable funds.
