(Bloomberg) -- Amundi SA’s 825 million-euro ($930 million) acquisition of Lyxor has left a significant dent in its climate credentials, according to a fresh analysis by nonprofit Reclaim Finance.

With its takeover of Societe Generale SA’s investment arm now complete, Amundi has become the biggest provider of exchange-traded funds in Europe after BlackRock Inc. But its enlarged status comes at an environmental cost, with the portion of its assets not covered by a coal-exclusion policy jumping 84% to 207 billion euros, the report shows.

“If Amundi really wants to be a climate leader, it needs to fix its passive problem, stop supporting the expansion of fossil fuels and get tough with Big Polluters,” said Lara Cuvelier, sustainable investment campaigner at the French nonprofit.

It’s the latest study to raise questions around the extent to which ESG ETFs do good, amid research showing that such products can contain fossil fuels and even weapons. Meanwhile, the flow of cash into ESG ETFs is on the rise, with Bloomberg Intelligence predicting the market will hit $1.3 trillion by 2025.

Reclaim Finance said most of Amundi’s passive funds, including those acquired as part of the Lyxor takeover, are not covered by the asset manager’s coal restrictions.

Amundi, which is majority owned by Credit Agricole SA, said it plans to have 40% of its passive offering in ESG funds by 2025. In an emailed response to a request for comment, the asset manager referred to itself as a “leader in the management of ESG assets and a pioneer in responsible investment.”

“As early as 2016, Amundi implemented an exclusion policy for coal,” it said. “This policy is regularly reinforced, in line with the commitments set out by the Credit Agricole Group. Amundi is thus pursuing a goal completely exiting from the sector by 2030 for OECD and by 2040 for the rest of the world.” Amundi said these targets apply to its “active management offering and our ESG ETF range for passive management.”

Voting

In its analysis, Reclaim Finance said Amundi’s voting record also raised questions. According to the report, the fund manager failed to vote against resolutions proposed by the management of coal companies. The nonprofit also faulted the investment firm for its continued support of the oil and gas industry.

In response, Amundi described its voting policy as “robust,” regardless of whether it’s dealing with actively or passively managed funds. The asset manager also cited a report by ShareAction, which offered a far more favorable view of its voting track record.

As a member of the Net-Zero Asset Managers’ initiative, Amundi has committed to reaching net-zero emissions by 2050 and to halving its carbon footprint by 2030. The firm’s chairman has also been handed a key role by France’s government in helping the country’s financial industry meet the goals laid out in the Paris climate accord.

But Cuvelier at Reclaim Finance said the asset manager’s support of the fossil-fuel industry raised questions around how seriously to take such pledges.

“Amundi might be a poster boy for the French financial sector on climate, but its record is nothing to be proud of,” she said. “Committing to net-zero while actively supporting oil, gas and coal developers is like buying more cigarettes while promising to give up smoking.”

Unless it addresses these exemptions, “Amundi risks becoming the holder of last resort for coal developers,” said Reclaim Finance.

©2022 Bloomberg L.P.