Demand for funds with a sustainable label is soaring

but investors may unknowingly end up owning shares in oil companies, mining conglomerates or tobacco firms.

The EU's new disclosure rules are an attempt to deliver transparency for investors focused on sustainability

but fund managers say the definition of sustainability is too vague and has created confusion about what makes the cut.

Funds can be marketed as Article 8 - nicknamed 'light green'

or if they have an explicit sustainable investment objective - Article 9 - 'dark green.'

Reuters analyzed the funds of 14 firms.

While many Article 8 funds have clear sustainability criteria, such as Allianz's Global Water fund,

some have limited claims to sustainability,

such as those tracking conventional stock and bond indexes,

investing in fossil fuels or buying debt from countries with weak environmental, social and governance standards such as Saudi Arabia and Nigeria.

Take Candriam's Cleome Index Europe Equities.

The fund is another Article 8 product.

It tracks the MSCI Europe index but excludes companies that don't comply with the U.N. principles on corporate values.

Critics say such exclusions are very limited.

When asked for an example, Candriam did not point to any company expelled from the U.N. list that is also part of MSCI Europe.

According to data published by Morningstar, one in four Article 8 funds has exposure to companies involved in controversial weapons and one in five to tobacco

and a third of Article 8 and 9 funds have more than a 5% exposure to fossil fuel firms.

Industry experts say none of the asset managers are breaking any rules.

But for some in the industry this represents so-called greenwashing,

where the benefits of a business or asset are exaggerated to attract environmentally aware investors.

Managers determine themselves which article to apply and Brussels does not check whether claims are justified.