Fidelity International has announced that three UK-domiciled equity funds will have applied to the “Sustainability Focus” addendum under the Sustainability Disclosure Requirements of the Financial Conduct Authority. The efforts are in support of the company’s commitment to sustainable investment and represent another step in the direction of compliance with the framework established by the UK regulator, whose implementation will notably increase clarity and prevent greenwashing in investment products.
As presented by the FCA in November 2023, SDR is a complete set of rules intended to guide investors in assessing the sustainability credentials of financial products. Some of its main provisions relate to naming and marketing requirements which will limit the use of sustainability-related terminology where a product is not officially labeled. Labels aim at distinguishing investment products between sustainability objectives and strategies.
The four different labels are called: Sustainability Focus, on products that invest in environmentally and socially sustainable assets; Sustainability Improvers, which concentrate on the improvement of assets over time for sustainability; Sustainability Impact, for measurable environmental or social impact; and a new label, Sustainability Mixed Goals, on funds combining two or more sustainability goals. Products will have to qualify based on set criteria, such as holding at least 70% of assets in alignment with the label’s goals, alongside solid monitoring and disclosure requirements.
Fidelity intends to apply the Sustainability Focus label across three funds: Fidelity Sustainable UK Equity Fund, Fidelity Sustainable Global Equity Fund, and the Fidelity Sustainable European Equity Fund. The three funds manage more than £865 million in assets and have invested considerably in companies contributing towards the environmental and social impact objectives. For the label that equally needs periodic disclosures, Fidelity will apply its proprietary Sustainable Development Goal tool and use the EU Taxonomy so that the funds comply.
While new naming and marketing requirements under the SDR were scheduled to become effective in December 2024, they will be implemented in April 2025, giving additional time for firms to move in concert with those rules. According to Jenn-Hui Tan, Chief Sustainability Officer at Fidelity, the SDR remains an instrumental vehicle in furthering sustainable investing in the UK. He said that the Sustainability Focus label is aligned with existing investment strategies of the firm, notably in managing SFDR Article 9 funds to European investors.
Aside from the current effort at labeling, Fidelity also aims at further broadening SDR label adoption across its fund range that really underlines its commitment to building investor confidence in sustainable investment solutions.