Standard Life is the first pension provider to ensure its default investment aligns with the regulator’s new sustainable fund labelling scheme.
The FCA Sustainability Disclosure Requirements (SDR) offer four distinct labels — Sustainability Focus, Sustainability Improver, Sustainability Impact and Sustainability Mixed-Goals. These are designed to help investors understand the objectives of the fund, with providers required to give information on the approach taken to achieve this goal and annual updates on progress.
The SDR labels have been designed to combat greenwashing, and improve both transparency and understanding about responsible investment.
Standard Life says its main default solution — Sustainable Multi Asset (SMA) — will invest all equity and fixed income allocations through eight funds with the ‘Sustainability Improvers’ label. This is ahead of any regulatory requirement for pension schemes to use these SDR labels, which at present are primarily utilised in the retail investment market.
This will see the SMA default invest mainly in transitioning companies to support the management of climate risks and opportunities on the journey to net zero by 2050 on behalf of members. This will be supported by an aligned stewardship strategy.
Standard Life says it will implement this approach early next year, with over 75 per cent of SMA investments aligned with a net zero 2050 goal, while complying with this new regulatory threshold. It says this will benefit around around 2m Standard Life pension savers.
It adds that using the improvers labelled funds paves the way for Standard Life to make similar changes to its Future Advantage and investment pathways solutions.
Standard Life head of investment proposition Callum Stewart says: “The inclusion of sustainability labelled funds in our proposition is a significant milestone and underlines our commitment to improving outcomes for members.
“We committed to a sustainable investment philosophy when transitioning 1.5 million customers to sustainable strategies between 2020 and 2022, and now believe we are the first pension provider to embrace the new regulatory framework in advance of it becoming a requirement for pension funds.
“This development helps future proof our solutions by embedding a verified sustainability approach to improve financial outcomes for members.”
Phoenix Group chief sustainable investment officer Sindhu Krishna adds: “Alongside our customers, we know that the impacts of climate change need to be addressed to optimise returns. The new FCA labelling regime brings integrity to the market and aims to bring more transparency and information to customers. This will enable a better understanding in how funds are investing in companies with a credible path to reach net-zero by 2050.”
To secure the new labelling, Standard Life worked with colleagues across the wider Phoenix Group, leveraging their expertise from the launch of the FTSE Phoenix Climate Aware Index series.