Research from FE fundinfo has revealed the scale of the challenge facing the investment industry to comply with the UK’s Sustainability Disclosure Regulations (SDR), ahead of a major deadline on naming and marketing of funds on 2 December.
The 2 December deadline concerns the naming and marketing of investment products. From this date, FCA-authorised firms will only be able to use sustainability-related terms in the naming or marketing of a fund if they meet strict guidelines. These cover a range of areas including anti-green washing, the sustainable character of a product (at least 70% of assets under management need to be sustainable) and disclosures about the sustainability of the fund.
Some 1,213 UK funds – covering ETFs, IA unit trusts, Open-Ended Investment Companies (OEICs) and investment trusts – will need to comply with these stringent requirements for SDR, given the sustainability-related terminology in their names. Other funds, including offshore funds, will come into scope at a later date.
Analysing the more than 12 sustainability-related terms set out by the FCA as a way to mark the funds needs to comply with SDR, FE fundInfo found 30% have ‘sustainable’ in their fund name, while 45% are marketed with ‘ESG’. Other key phrases included ‘Climate’ (86 funds), ‘Green’ (40 funds), ‘Responsible’ (32 funds), ‘Social’ (26 funds) and Transition (23 funds).
Additionally, FE fundinfo found 416 UK funds in total had ‘Sustainability’, ‘Sustainable’ or ‘Impact’ in their names. These funds face an extra level of compliance for 2 December: the SDR’s labelling regime. There is growing industry anxiety at the low initial uptake of the investment labels (Sustainability Focus, Sustainability Improvers, Sustainability Impact, and Sustainability Mixed Goals). These were brought in to simplify how sustainable investing was governed and communicated transparently to investors. Naming and marketing requirements will apply to both labelled and unlabelled firms.
Dr. Matthias Breier, head of ESG product at FE fundinfo, said: “The clock is ticking for UK funds to meet the December deadline. Getting these labels is a tricky process, with only a few funds able to do so at present. We are likely to see some movement in the ESG market over the coming months, as some firms will have to rebrand or reposition their funds if they cannot comply in time.
“Firms need to be engaging with compliance right now. Rather than thinking about it as a 2 December deadline, everything needs to be wrapped up in early October to ensure investors receive all the necessary disclosures in the required 60 day window.
“These regulations are designed to combat greenwashing by ensuring that funds marketed as sustainable truly embody those principles. Firms that successfully align with the SDR will not only meet the regulatory standards but also position themselves as leaders in a market that increasingly values transparency and integrity.
“When fund managers embrace these requirements, they actively drive the evolution of sustainable investing and contribute to a more accountable and impactful investment environment.”
The data was sourced from FE Analytics, FE fundinfo’s fund research platform.
