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FCA Adds Fourth Sustainable Fund Category in SDR Statement

In its delayed Sustainability Disclosure Requirements (SDR) and investment labels policy statement, the UK Financial Conduct Authority (FCA) has introduced ‘Sustainability Mixed Goals’, a fourth label for funds with sustainable objectives. The SDR proposals previously included plans for three categories of sustainable investment label – sustainable focus, sustainable improvers and sustainable impact – to help investors differentiate between investment products with different objectives. This new Sustainability Mixed Goals label is for products with a sustainability objective which invest at least 70% in accordance with a combination of sustainability objectives for the other three labels. The FCA noted that respondents to stakeholder feedback flagged concern that funds invested with a combination of attributes of the existing three labels would not qualify as sustainable under the proposals. “We agree that products invested in a mix of assets that are already sustainable, have the potential to improve their sustainability over time, and/or aim to achieve a positive impact should have a place in the labelling regime,” the regulator said. It added that the four labels aim to give consumers confidence that a product has specific a sustainability objective as part of its investment objectives, and that the fund manager has committed to deliver on the sustainability objectives that aim to improve or pursue positive outcomes for the environment and/or society. The investment labels, disclosure, and naming and marketing rules initially apply to UK funds offered to retail clients, although they will eventually be extended to institutional investors.

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