Financial advisers’ initial predictions about the popularity of the FCA’s Sustainability Disclosure Requirements (SDR) fund labels have been turned on their head.
The Sustainability Focus label has emerged as the most commonly used designation, while the Sustainability Mixed Goals label — originally tipped to dominate — has been adopted the least.
To date, 63 funds have been approved to use the Sustainability Focus label, compared with just four using the Sustainability Mixed Goals label.
This comes in contrast to expectations captured in Investment Association (IA) research from February 2025.
At the time, among advisers planning to use SDR labels, 35% anticipated selecting funds under the Sustainability Mixed Goals category, the highest of any label.
By contrast, only 16% expected to use the Sustainability Focus label, placing it last in anticipated use.
IA market insight manager Sarah Shehabi confirmed that, based on adviser feedback, the organisation initially predicted the Mixed Goals label would become the most widely adopted.
Informed decisions ‘hard for investors’ without SDR
IA director of market insight Miranda Seath added that advisers’ assumptions were “likely due to an assumption” that mixed asset funds would align most naturally with the Mixed Goals label.
However, in practice, both mixed asset and multi-thematic funds have instead been opting for the Sustainability Focus designation.
When the FCA first unveiled its labelling plans, only three labels were planned: Sustainability Focus, Sustainability Improvers and Sustainability Impact.
But on the day of the official announcement in November 2023, the regulator introduced a surprise fourth label: Sustainability Mixed Goals.
The overarching aim of the SDR regime is to “improve the trust and transparency of sustainable investment products and minimise greenwashing”.
Greenwashing refers to “making people believe that your company is doing more to protect the environment than it really is”.
Overall adoption of the SDR labelling system has been relatively slow, with just over 100 funds securing approval to use a label.
Nevertheless, the system appears to be having an impact. A recent IA survey found that 80% of investment firms believe the SDR framework has helped reduce greenwashing in the industry.
Carol Thomas, the IA’s head of sustainability and responsible investment, commented: “Although there are currently fewer labelled funds than originally anticipated, a quarter of firms tell us that they will seek labels for funds in the next one to two years.
“We expect to see more approved labels for funds throughout 2025, as firms and the regulator get to grips with implementation.”
