Recent analysis shows that many investment funds marketed as “Green” or “ESG” continue to hold substantial stakes in fossil fuel companies or support businesses with only superficial climate commitments. Platforms like Fossil Free Funds report that dozens of funds bearing sustainability labels actually maintain significant fossil fuel exposure within their portfolios. In some instances, these funds may finance greenhouse gas emissions at rates even higher than broad-market benchmarks such as the S&P 500, undermining their sustainable branding. This persistent disconnect between marketing claims and investment practices has led to growing skepticism and concern among investors and the public.

In response, in some parts of the world, regulatory scrutiny of greenwashing is increasing. In Europe, the Sustainable Finance Disclosure Regulation (SFDR) now requires asset managers to disclose how they integrate sustainability risks and track adverse climate impacts, demanding detailed, standardized reporting on objectives, asset proportions, emissions, and other key criteria. This helps investors compare products and hold providers accountable, making greenwashing more difficult.

By contrast, oversight in the United States remains uncertain. In 2025, the SEC withdrew proposals for mandatory ESG disclosures and delayed implementation of its updated “Names Rule,” which will eventually require ESG-labeled funds to ensure at least 80% of assets match stated objectives and provide clearer disclosures. This regulatory back-and-forth continues to complicate transparency in ESG investing.

Fortunately, even as regulations evolve, consumers now have more tools than ever to scrutinize a fund’s actual climate impact, helping separate true sustainability claims from mere marketing.