Most UK-domiciled funds with sustainability characteristics remain unlabelled as the SDR deadline passes today, according to Morningstar.
Fund managers were required to decide whether to adopt one of four sustainability labels under the new rules, but only 80 funds, representing £34.5bn in assets, have committed to a label. Meanwhile, 325 funds managing £280bn have chosen to provide consumer-facing disclosures without selecting a label.
The Focus label has been the most popular choice, taken up by more than half of labelled funds with Impact, Improvers, and Mixed Goals following, but in much smaller numbers. Additionally, all labelled funds are actively managed, with global large-cap equity strategies dominating, while fixed-income funds make up only a small fraction of the total.
Schroders leads in terms of labelled fund assets among fund providers, followed by Liontrust, M&G, and Columbia Threadneedle. The most common sustainability themes among labelled funds include greenhouse gas reduction, water, and renewable energy, with Schneider Electric, ASML, and AstraZeneca among the most widely held stocks across all four labels.
But many fund managers have chosen to stay outside the labelling system, though they have incorporated ESG themes, with nearly half using sustainability-related terms in their names. BlackRock is by far the biggest player in this space, managing 66 non-labelled funds worth £150bn, followed by Royal London and Columbia Threadneedle, which oversee significant assets in this category.
Morningstar Sustainalytics head of sustainable investing research Hortense Bioy says: “The 2 April deadline for the SDR naming and marketing rules has passed, and the picture of the UK labelled and non-labelled fund landscape has yet to be complete.
“It’s been a long process, but the result should help sustainability-conscious investors better understand what they are investing in. As the landscape of UK funds with sustainability characteristics continues to evolve in the coming months, investors will need to understand how SDR has affected their portfolios.”
