PA future provides an interesting update on investment fund actions related to sustainability-related naming under the UK Sustainability Disclosure Requirements (SDR):
“Some 115 funds dropped ESG-related terms from their names in 2024 as the industry grappled to comply with the Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR), according to Morningstar’s Q4 Global Sustainable Fund Flows report.
A further 48 swapped ESG-related terms, with another 50 adding ESG-related terms to their branding.
The deadline for funds to readjust their marketing in line with SDR may have passed on 2 December last year, but analysts at Morningstar ‘expect an acceleration of rebranding activity in the coming months’ as more funds seek to comply with the European Securities and Markets Authority’s (ESMA) naming guidelines on 21 May.
The report also anticipates that 30% to 50% of European ESG funds will change their names by mid-2025, with 4,700 funds falling within the scope of the ESMA guidelines.”
This makes me wonder how these changes will be reflected in statistics on inflows to/outflows from “sustainable funds.” By changing fund names from something “sustainable”, does that count as an outflow from sustainable investing? It certainly reduces the number of funds/dollars that can be considered “sustainable investments” so inflows will decline accordingly. Some realignment is needed, given how ESG/sustainability labels were misused. On the other hand, some funds may change their names away from sustainability in an abundance of caution even if they meet the criteria.
Members can learn more about ESG in the EU/UK financial sector here.
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