New research has revealed that UK investment funds worth £34.5 billion ($45 billion) in assets under management have adopted sustainability labels, while a far larger sum—£280 billion ($368 billion) —remains unlabelled, despite many of these funds including sustainability characteristics.
The findings come as the Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR) on fund labelling and naming officially come into force. While the SDR regime took effect on 31 May 2024, the accompanying anti-greenwashing rules and formal investment labels have been applicable since 31 July 2024. The rules aim to enhance transparency, improve investor protection, and support the UK’s ambition to remain a global leader in sustainable finance.
With the grace period for UK-authorised funds ending on 2 April 2025, investment firms are now required to comply fully with SDR requirements. These include publishing consumer-facing disclosures and adhering to strict naming rules to ensure that references to terms such as “sustainable” or “impact” accurately reflect a fund’s investment strategy.
Funds making sustainability-related claims must now choose from one of four FCA-approved labels. These are designed to provide clarity on whether a fund invests in sustainability-focused assets, solutions with measurable impact, assets expected to transition to sustainability over time, or a blend of these approaches.
Analysis by Morningstar Sustainalytics, released to coincide with the enforcement date, shows that 56% of the labelled funds—housing nearly £23 billion—have chosen the “Focus” label. This label is assigned to funds prioritising investments with clear sustainability aims for society and the environment.
In total, 80 open- and closed-end funds have received a sustainability label, representing £34.5 billion in assets under management. A further 325 funds, holding £280 billion, have not yet opted for a label but have published their required disclosures and incorporate sustainability-related criteria. BlackRock leads among non-labelled fund providers, with 66 funds totalling £150 billion.
Morningstar Sustainalytics’ Head of Sustainable Investing Research, Hortense Bioy, commented: “The 2 April deadline for SDR naming and marketing rules has passed, but the UK’s labelled and non-labelled fund landscape is still taking shape. The process has been lengthy, but these measures should help sustainability-minded investors better understand what they are investing in.”
The FCA reported in February that 100 fund labels had already passed through its review process. Common investment themes among labelled funds include greenhouse gas reductions, renewable energy, and water management. Frequently held companies include Schneider Electric, ASML, AstraZeneca, Microsoft, GSK, Unilever, and Ecolab—all noted for their relative preparedness for a low-carbon transition.
The FCA has also published guidance to help firms meet the new requirements, offering examples of best and poor practices to mitigate greenwashing and ensure effective implementation.
