Up to 300 UK open- and closed-end funds will opt for one of the four sustainability labels introduced by the Financial Conduct Authority by the end of this year, Morningstar has estimated.

The firm said this was “an optimistic scenario” and noted that labelled funds may represent 8% of funds domiciled in the UK and less than 3% of all funds available for sale in the country, amounting to roughly £110bn in total assets.

By comparison, the financial regulator estimated in its Sustainable Disclosure Requirements policy statement in November that around 280 funds that currently have key sustainability-related terms in their name or objectives will use a sustainability label.

Neither the FCA or Morningstar take into account new funds that will be launched this year and may opt for a label.

FCA unveils final SDR rules including fourth ‘Mixed Goals’ label for ‘blended strategies’

Based on its assessment of the 300 funds, the firm is predicting that ‘Focus’ will be the dominant label, representing almost half (46%) of labelled products, followed by ‘Mixed Goals’ (31%), ‘Improvers’ (12%) and ‘Impact’ (11%).

Of the four labels, Morningstar said asset managers have the best understanding of the Focus label and the type of strategy that will qualify for this label, given its parallel with SFDR, despite questions about what constitutes a “robust and evidenced-based standard”.

Some fund houses also acknowledged the appeal of the recently introduced Mixed Goals label, due to its flexibility.

The label allows asset managers to divide portfolios and allocate as many assets to sustainability objectives as they see fit, provided that 70% of the aggregate assets align with the criteria of at least two of the other three labels.

Click here to read the full article



020 7071 3945


Throughout our site you will find links to external websites. Although we make every effort to ensure these links are accurate, up to date and relevant, we cannot take responsibility for pages maintained by external providers.