With today’s deadline for UK-domiciled funds to opt into using one of the four Sustainability Disclosure Requirements (SDR) sustainability labels, it has emerged that just 80 UK open- and closed-end funds have so far publicly announced they had opted for a label, representing £34.5bn of assets under management.
Meanwhile, 325 other funds with sustainability characteristics, accounting for £280bn of assets, have not adopted a label but have provided their first consumer-facing disclosures, according to a Morningstar report, “The UK SDR Labelled and Non-Labelled Fund Landscape”.
“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.” said Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics, who added that it was likely that more funds will choose to adopt a label.
“It’s been a long process, but the result should help sustainability-conscious investors better understand what they are investing in,” she said.
“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.”
Focus is the dominant label, representing 56% of all labelled funds, followed by Impact (26%), Improvers (13%) and Mixed Goals (5%).
All labelled funds are actively-managed, the report found. Global large-cap equity strategies dominate, while fixed income funds are under-represented (31% and 4% of total assets, respectively).
Schroders takes the top spot of the labelled fund provider table by assets, followed by Liontrust, M&G and Columbia Threadneedle.
The sustainability themes most targeted by labelled funds are greenhouse gas emission reduction, water, and renewable energy.
Schneider Electric, ASML, and AstraZeneca are the three most commonly held companies in labelled funds. Most of the top 15 common holdings are present in portfolios across all four labels.
Investors will find additional strategies with sustainability characteristics among non-labelled funds.
Within that universe, about half have ESG-related terms in their names, including 55 funds (17%) that use the term “ESG”, 30 funds (9%) with the word “responsible”, 16 products (5%) employing “ethical” and 20 using a climate-related term (6%).
BlackRock is by far the largest provider of non-labelled funds, with 66 products totalling £150bn of assets. It is followed by Royal London (£18.7bn in 8 funds) and Columbia Threadneedle (£16.7bn in 20 products).
