BOSTON (Reuters) - Two of America’s best-known green investors are reassessing their stakes in global insurance broker Arthur J. Gallagher & Co after a Reuters investigation into the company’s lucrative side-business in “clean coal”.

FILE PHOTO: A view of Duke Energyís Marshall Power Plant in Sherrills Ford, North Carolina, U.S., November 29, 2018. REUTERS/Chris Keane/File Photo

A.J. Gallagher AJG.N has invested in 34 facilities producing so-called refined coal, which is chemically treated to make it burn cleaner and heavily subsidized by the U.S. government. The firm also holds a 46.5 percent stake in Chem-Mod LLC, which provides the chemicals used to produce the fuel.

A.J. Gallagher has accumulated about $850 million worth of U.S. government tax credits from the business. But many utilities burning the coal have pumped out more smog, not less, over the past decade, and the chemicals have contributed to elevated carcinogens in downstream drinking water supplied to more than 1 million people, according to the Reuters Special Report.

Now, the Green Century Funds and Calvert Funds - which include A.J. Gallagher in their portfolios based on its record as an insurance firm, not a coal supplier - said they will review the company’s green credentials. Green Century and Calvert are two of nation’s leading money managers focused on corporate environmental, social and governance matters.

The idea behind the strategy is to help investors sidestep companies whose activities they find objectionable, such as polluting the environment.

“In light of this new information, we certainly will … press the company to stop profiting from schemes devised by the fossil fuel industry to the detriment of U.S. citizens and taxpayers,” Green Century said in a statement, calling clean coal “a myth”.

A.J. Gallagher is one of about 360 companies in the $250 million Green Century Equity Fund GECQX.O, which advertises itself as “100% percent fossil fuel free.”

The fund, which held 4,394 A.J. Gallagher shares at the end of October, is passively managed and invests in the companies that are in an index run by MSCI Inc MSCI.N.

MSCI declined to comment for this story.

Calvert Research and Management, a unit of Eaton Vance Corp, said it has contacted A.J. Gallagher as part of a reassessment of the company’s ESG performance. A.J. Gallagher is a holding in the $1.3 billion Calvert U.S. Large Cap Core Responsible Index Fund CISIX.O.

“In response to this new information, we have contacted the company and will consider this information in our assessment of ESG performance,” Calvert said in a statement, referring to the Reuters reporting.

The Calvert fund has built its own index, drawing from the 1,000 largest publicly-traded U.S. companies based on market capitalization. From there, using its own principles for responsible investment, that list had been narrowed to about 720 companies, including A.J. Gallagher.

A.J. Gallagher did not respond to messages seeking comment.

Assets in portfolios that use various ESG-related criteria have grown to about $23 trillion globally, an increase of more than 600 percent over the past decade, fund research firm Morningstar Inc said in a 2018 report.

Shares of A.J. Gallagher are held in at least ten other mutual funds that screen companies on environmental, social and governance (ESG) criteria, including ones run by BlackRock Inc, Fidelity Investments and Vanguard Group.

The company’s broad inclusion highlights the lack of clear criteria for how companies’ environmental credentials are vetted in this fast-growing green investment sector, said Vanguard spokesman John Woerth.

“There is no universally-accepted definition of ESG,” he said in a statement to Reuters.

The $4.4 billion Vanguard FTSE Social Index Fund VFTSX.O holds an investment in A.J. Gallagher. But Vanguard does not pick the companies in the index fund it offers to investors, Woerth said. That job is done by index providers such as MSCI, or in Vanguard's case, FTSE Russell.

“Index funds are beholden to the benchmarks they track,” he said. “While we engage with index providers to understand their methodologies, it is our view that index providers are independent and should have complete autonomy when constructing an index and assembling its constituents.”

Jill Davies, a town board member for Woodstock, Vermont - which has endowment money invested in the Vanguard fund - said she was disappointed by the company’s inclusion.

A.J. Gallagher’s “activities in coal don’t seem to align with the social responsibility concept behind this Vanguard fund,” she said.

FTSE Russell said it was working to improve its ESG screening methods.

“This is especially relevant in a rapidly expanding area like ESG,” FTSE spokesman Tim Benedict said in a statement.

(This story has been refiled to remove an errant apostrophe in the first paragraph and a redundant figure in the 16th paragraph)