SDR: A Label That Matters
The FCA’s Sustainability Disclosure Requirement (SDR) labels help investors navigate sustainable investing with confidence. We’re proud to be the home of the UK’s only fully SDR-labelled fund range. Because sustainable investing shouldn’t be complicated.
Sustainable investing has grown rapidly over the past decade, bringing with it an increasing number of funds using terms like “green,” “sustainable” and “ESG” to describe their portfolios. However, this growth brought the risk of greenwashing, where funds using these terms may appear more sustainable to consumers than their underlying investment approach justifies.
The FCA introduced the Sustainability Disclosure Requirement (SDR) regime to help address this challenge. The regime is intended to help consumers navigate sustainable investment products and reduce greenwashing. The FCA’s anti-greenwashing rule, in particular, requires products and services that are referencing sustainability characteristics to be consistent with those characteristics – and to be fair, clear and not misleading.
The four labels
The FCA created four labels to distinguish between different approaches to sustainable investment. Under the FCA’s naming and marketing rules, funds using terms such as “sustainable” or “impact” in their names generally need to adopt one of the four labels.
| Sustainability Focus | These funds invest in assets that are environmentally or socially sustainable, determined by a robust, evidence-based standard of sustainability |
| Sustainability Improvers | These funds invest in assets that have the potential to become more sustainable over time, determined by their potential to meet a robust, evidence-based standard |
| Sustainability Impact | These funds seek to achieve a predefined, positive, measurable environmental and/or social impact |
| Sustainability Mixed Goals | These funds invest in assets that meet or have the potential to meet a robust, evidence-based standard for sustainability and/or invest with an aim to achieve positive impact |
A market required to reconsider its claims
The introduction of SDR prompted fund groups across the UK to review whether the sustainability language attached to their products could be supported under the regime.
Some funds adopted a label, while others removed or changed sustainability-related terms in their fund range. Morningstar data subsequently reported by Portfolio Adviser found that 115 funds removed ESG-related terms from their names during 2024, while a further 48 replaced one ESG-related term with another.1
At EdenTree, we welcomed the introduction of the FCA’s Sustainability Disclosure Requirements because we believe higher standards benefit investors.
Sustainable investing should be clear and transparent. At a time when investors are increasingly seeking sustainable investment solutions, we believe greater transparency is essential to building trust and confidence in the market.
That’s why we aligned our fund range with the SDR regime. As part of this process, funds must clearly articulate their sustainability objective, demonstrate how that objective is embedded within the investment process and provide ongoing evidence that it is being implemented in practice.
However, sustainability was embedded throughout our investment process before SDR. Our proprietary EdenTree Standard provides a rigorous framework for assessing how companies create value for the planet, people and investors.
Rather than changing our philosophy to fit a label, we pursued labels that reflected the philosophy and standards already underpinning our investment range.
Today, EdenTree is home to the UK’s only fully SDR-labelled fund range, with every fund either carrying a Sustainability Focus or Sustainability Impact label.
| SDR label | Fund name |
|---|---|
| Sustainability Focus | EdenTree Sustainable European Equity |
| EdenTree Sustainable Global Equity | |
| EdenTree Sustainable Managed Income | |
| EdenTree Sustainable Short Dated Bond | |
| EdenTree Sustainable Sterling Bond | |
| EdenTree Sustainable UK Equity | |
| EdenTree Sustainable UK Equity Opportunities | |
| EdenTree Global Sustainable Government Bond | |
| Sustainability Impact | EdenTree Global Impact Bond |
| EdenTree Green Impact Equity | |
| EdenTree Green Impact Infrastructure |
While the introduction of SDR has helped bring greater clarity to sustainable investing, sustainability was at the heart of EdenTree’s investment approach long before SDR was introduced. We believe that understanding how companies manage their environmental and social impacts is essentially to identifying resilient businesses capable of delivering long-term value for investors.
Central to this philosophy is the EdenTree Standard, our proprietary sustainable investment framework, which provides a consistent, evidence-based approach for assessing whether companies meet the high standards we expect before they can be considered for investment.
The EdenTree Standard is premised on a core belief: companies that create value for people and the planet are often better positioned to create value for shareholders over the long term.
A robust and repeatable framework
The EdenTree Standard is designed to provide consistency across our investment range. The framework provides a structured process where companies are assessed against a range of sustainability criteria. It helps our investment team evaluate how organisations create value, manage risks and contribute to positive environmental and social outcomes.
Businesses are continually reassessed. This ongoing monitoring helps ensure companies continue to meet our expectations and remain aligned with the objectives of the funds in which they are held.
Stewardship and engagement
We believe that being an active and responsible steward of capital is about more than simply selecting investments.
Through our ongoing dialogue with companies, we seek to encourage positive change, better disclosure and improved outcomes for stakeholders.
This engagement allows us to gain deeper insight into management thinking, understand how businesses are responding to emerging sustainability challenges and encourage progress where improvements can be made.
Today, every EdenTree fund carries either a Sustainability Impact or Sustainability Focus label. But the labels are only part of our story. What matter most is what sits behind them: decades of sustainable investment expertise, a rigorous and repeatable assessment framework, ongoing stewardship and engagement, and a commitment to helping investors understand how their capital is being invested.
Frequently asked questions (FAQs)
Which EdenTree funds carry an SDR label?
All our funds carry an SDR Sustainability label, underscoring our long-standing commitment to sustainable and impact investment.
Eight funds sitting in the Sustainability Focus category, and three carry a Sustainability Impact label, as below:
| SDR label | Fund name |
|---|---|
| Sustainability Focus | EdenTree Sustainable European Equity |
| EdenTree Sustainable Global Equity | |
| EdenTree Sustainable Managed Income | |
| EdenTree Sustainable Short Dated Bond | |
| EdenTree Sustainable Sterling Bond | |
| EdenTree Sustainable UK Equity | |
| EdenTree Sustainable UK Equity Opportunities | |
| EdenTree Global Sustainable Government Bond | |
| Sustainability Impact | EdenTree Global Impact Bond |
| EdenTree Green Impact Equity | |
| EdenTree Green Impact Infrastructure |
What does it mean if a fund has an SDR label?
The four Sustainability labels were designed to provide investors with the information they need to make educated decisions as to which funds best align with their needs and sustainability appetite.
A fund may only use the sustainability-related terms in its name if it has adopted an SDR label, and may only adopt a label if it complies with five general criteria, as well as the specific criteria required for that particular label. The general criteria are:
- Sustainability objectives – every labelled fund must have a sustainability objective (to improve or pursue positive environmental and/or social outcomes) as part of its investment objective
- Investment policy and strategy – Ordinarily, at least 70% of a labelled fund’s assets must be invested in accordance with its sustainability objective, with reference to a robust, evidence-based standard that is an absolute measure of environmental and/or social sustainability
- Key performance indicators (KPIs) – funds/ managers must identify KPIs to measure the progress of a labelled fund or its investments against the sustainability objective
- Resources and governance – funds/ managers are responsible for appropriate resources, governance and organisational arrangements to support delivery of the sustainability objective
- Stewardship – funds / managers must disclose their stewardship strategy to support the delivery of the sustainability objective.
What are the Naming and Marketing Rules?
Under the SDR regime, sustainability-related terms may only be used in product names and marketing if:
- they use a label and follow an appropriate naming convention – e.g. provided that, where the ‘sustainability focus’, ‘sustainability improvers’ or ‘sustainability mixed goals’ labels are used, the word ‘impact’ is not used in the product’s name, or
- they do not use a label but comply with the ‘Product name’ and ‘Marketing’ sections below.
Product name
- The product must have sustainability characteristics and the product’s name must accurately reflect those characteristics, but the terms ‘sustainable’, ‘sustainability’, ‘impact’ and any variation of those terms must not be used
- Firms must produce the same types of disclosures as required for a labelled product
- Firms must also produce and prominently publish a statement to clarify that the product does not have a label and the reasons why
Marketing
- Firms must produce the same disclosures and statement as those required when sustainability-related terms are used in the name of a product
What are the disclosure and reporting requirements?
All funds with a SDR Sustainability label, and any non-labelled funds with Sustainable characteristics must produce:
- Fund prospectus and KIID – this pre-contractual document must detail the fund’s sustainability objective and policy, explaining how the fund will achieve this and its sustainability outcomes
- Two-page SDR consumer-facing document - this consumer-friendly version of the fund prospectus which looks to make the information it contains consistent, accessible and easier for a consumer to understand key sustainability, environmental, social and governance features of the fund
- An annual product-level sustainability report – Each report should cover a reporting period of 12 months, with the first report produced within 12 months from the date of fund adopting a sustainability label
What is the Anti-Greenwashing rule?
The anti-greenwashing rule applies to all UK FCA-authorised firms who make sustainability-related claims about their products and services.
All firms must ensure that any communications made about the sustainability-related characteristics of their products and services are:
- consistent with the sustainability characteristics of their financial product or service; and
- fair, clear and not misleading
Any references to sustainability must be:
- Correct and capable of being substantiated
- Clear and presented in a way that can be understood
- Complete – they should not omit or hide important information and should consider the full life cycle of the product or service
- Fair and meaningful in relation to any comparisons to other products and services
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