The Financial Conduct Authority’s (FCA’s) sustainability labels are helping to improve trust in fund sustainability claims – although uptake and understanding remain limited, according to new research from the Association of Investment Companies (AIC).
The AIC’s latest ESG Attitudes Tracker found 39% of advisers and wealth managers said the labels had increased their trust in sustainability claims, a significant jump from 28% last year.
Wealth managers were more likely than financial advisers to report an increase in trust, at 51% and 31%, respectively.
The FCA introduced its four sustainability labels in July 2024 as part of its Sustainability Disclosure Requirements regime, aimed at reducing greenwashing and improving confidence in sustainability-related claims in the industry.
According to Morningstar data cited by the AIC, 103 funds have so far adopted a label, including six investment trusts. Sustainability Focus is the most widely used, with 71 labelled funds.
However, 60% of advisers and wealth managers said they had not used the labels – although this was down from 68% last year.
Understanding also remains mixed. Just over half said they understood the Sustainability Impact, Sustainability Focus and Sustainability Improvers labels, while 45% were confident they understood Sustainability Mixed Goals.
Among private investors, 31% said they had some understanding of the labels, while 38% were unaware of them. Half said the labels were likely to increase their trust in sustainability claims.
Nick Britton, research director at the AIC, said: “It’s good to see that the FCA’s labels are starting to make a dent in this scepticism, but it’s too early to say that the problem has been fixed.
“The universe of labelled funds is very restricted with barely 100 to choose from, and there’s still plenty of room for improvement when it comes to use and understanding of the labels.”
More broadly, the proportion of intermediaries saying they trust funds’ sustainability claims doubled from 13% last year to 26% this year.
Satisfaction with ESG and impact reporting also reached a record high, with 57% of intermediaries who use asset managers’ reporting saying all or most of it was satisfactory, up from 54% in 2025 and 42% in 2024.
Among private investors who use investment trusts and refer to ESG reporting, 53% said they were satisfied with all or most of the reporting, compared with 50% last year.
Read more: FCA-established group calls on advisers to ask clients about ESG preferences
