SDR fund labelling March update

The UK’s SDR fund labelling regime aims to help people find sustainable funds that meet their requirements.

These labels are of course not a ‘complete picture’ as they are intentionally high level.  (They won’t be competing with the more granular filters on our Fund EcoMarket database  any time soon.)

But in terms of helping people to find sustainable funds, recognise that strategies vary, and encourage wealth managers, financial advisers and others to dig deeper into fund strategies – we believe labelling has the potential to be really useful, but there remains work to be done.

SDR labels – making progress, but not there yet

We cannot show which funds that have been approved to use which labels on our site just yet as many fund managers have asked us to wait until they go public (which is underway) – but our research indicates the following will soon be visible on our (open) database.

• 60 ‘Sustainability focus’ labelled funds
• 27 ‘Sustainability impact’ labelled funds
• 5 ‘Sustainability improver’ labelled funds
• 1 ‘Sustainability mixed goals’ labelled fund.

This is positive – but in terms of context – I’d suggest there is still some way to go. The FCA labelling process remains problematic – too many poorly informed requests are (and have been) made of fund managers – and perhaps as a result, the cohort of funds that have told us they are ‘Unlabelled with sustainability characteristics’ – is even larger at 157 funds. (A number of these funds are comparable to funds that have achieved labels, in our view).  Such funds will have to publish client disclosures (as labelled funds do) – but won’t be able to display a label.

And many funds are still ‘Working towards’ adopting a label.  Their situations vary.  Some will be using labels soon (as described) .  Others, in my view, have been stuck in the system for too long – and others have temporarily withdrawn.

And there are of course also many hundreds of relevant funds that are currently ‘out of scope’ for SDR, notably offshore funds and pensions.

In addition, from our ‘cohort’, we are also aware of 37 (relevant) funds that have closed, and 82 funds that have changed their names since June 2024.

In other words – this is a period of massive change for sustainable funds.  SDR has done a good job ending false claims (greenwash), but whilst labelling is going in the right direction, there remains work to be done…