Sustainability labels
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What are the FCA’s sustainability labels?
The Financial Conduct Authority (FCA) introduced sustainability labels to help stamp out greenwashing and make it easier for investors to find sustainable funds that meet their needs.
| Name | Definition | Label |
|---|---|---|
| Sustainability Focus | Funds investing in companies that are environmentally and/ or socially sustainable. |  |
| Sustainability Improvers | Funds investing in companies with the potential to improve their environmental and/ or social sustainability over time. |  |
| Sustainability Impact | Funds investing in companies that aim to achieve a positive, measurable impact on the environment and/ or society. |  |
| Sustainability Mixed Goals | Funds investing in a mix of companies that are already sustainable, have the potential to become more sustainable, or aim to achieve a positive impact. |  |
Sustainable funds are required to meet strict criteria to achieve a label. For example, they must have a sustainability-related objective, alongside a financial one, and produce detailed disclosures to help investors understand and compare their approach.
Only labelled funds can use the term ‘sustainability’ (or any variation of that word), in their names, and only Sustainability Impact funds can use the term ‘impact’. There are also strict limits on how non-labelled funds can use other sustainability-related terms (such as ESG, climate, green, net zero etc.) in their fund name and marketing, with most unlabelled funds restricted to using sustainability-related terms in their marketing for short, factual statements only.
Where funds use sustainability labels, you can find this on the factsheet for the specific fund. The sustainability-related disclosures can be accessed on the ‘Key Features & Documents’ tab for that fund on the HL website.
What about exclusions-based funds?
Avoiding investments in areas that cause environmental or social harm is one way to reflect your values in the way you invest, but it doesn’t necessarily lead to improved sustainability outcomes. Most exclusions-based funds therefore don’t qualify to use a label. However, as exclusions-based funds generally avoid the worst environmental and social offenders they’re often more sustainably positioned than traditional funds.
Funds that don’t qualify to use a label, but still have some sustainability characteristics, can use some sustainability-related terms in their names and marketing as long as they make similar disclosures to those produced by labelled funds, and publish a statement explaining why they don’t use a label. You can find information published about a particular fund on the ‘Key Features & Documents’ tab of the HL fund factsheet.
Overseas funds
Overseas funds are not currently subject to the FCA’s labelling system, so they may not meet the same standards as UK-based funds. The FCA is working to include overseas funds in the future, but until then, they are not eligible for a label.
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