Some of Europe’s most popular climate funds have been found to do no better at avoiding carbon emitters than a benchmark index with no environmental focus, according to new research.

A report by analytics provider Investment Metrics found that four of the seven best-selling European climate funds were more exposed to carbon emissions than the MSCI World Index, which tracks over 1,600 of the biggest companies across North America, Europe and Asia-Pacific.

Funds that failed to beat the MSCI index include climate strategies managed by DWS Group, Franklin Resources and Lombard Odier Investment Management, according to Investment Metrics, which provides portfolio analytics and data to institutional investors and advisers representing $14trn (€12.5trn).

The findings underscore the difficulty climate-focused investors face when selecting funds with a view to reducing their carbon footprint.

It also raises questions around labelling as financial products marketed as having an environmental, social and governance focus proliferate.

Concerns about green-washing, a term given to exaggerated or misleading claims of ethical investing, have picked up this year as the ESG market mushrooms. Bloomberg Intelligence estimates ESG assets exceeded $35trn last year, and will soar past $50trn by 2025.

Regulators have started to take a more aggressive stance in policing ESG labelling.

DWS, whose CEO is Asoka Woehrmann, made headlines in August, when it emerged that the Deutsche Bank AG unit is being investigated by the US Securities and Exchange Commission, the Department of Justice and German regulator BaFin, after its former sustainability head alleged its ESG claims were misleading.

DWS has vehemently rejected the allegations.

The report by Investment Metrics said part of the reason some climate funds were failing to deliver low-carbon results was because they hold so-called transition stocks, whereby companies gradually try to wean themselves off carbon-intensive activities.

The alternative would be to exclude such firms altogether, and ignore transition assets.

A separate research report released earlier this year by London-based non-profit InfluenceMap found that more than half of climate-themed funds sold by asset managers failed to achieve goals established in the Paris Agreement.

An active approach by fund managers to reduce climate exposure can pay off, the Investment Metrics report also found. The DWS-managed climate fund, DWS Invest ESG Climate Tech, showed the biggest reduction in exposure to carbon emissions.

That improvement was caused mostly by portfolio adjustments.

“Portfolio trading decisions are the main reason for the significant improvement in the DWS Climate Change score,” the report said.

“Had the portfolio managers not intervened, the score would have increased only marginally.”

The performance was boosted by buying shares in Japanese pump and turbine manufacturer Ebara Corp and selling positions in companies including electric vehicle manufacturer Tesla, it said.