The UK’s independent financial regulator, the Financial Conduct Authority (FCA), is rolling out new rules aimed at simplifying green investing. These changes are designed to help investors easily understand which funds are genuinely sustainable and how the funds aim to contribute towards environmental or social goals. To achieve this, the FCA has introduced four clear fund labels.
Focus
This label is for funds that primarily invest in companies and projects that are already taking meaningful action to protect the environment or benefit society. Examples could be renewable energy projects, low-carbon technologies, or affordable housing initiatives. Funds adopting this label direct at least 70% of their money to sustainable assets.
Improvers
Funds with this label focus on businesses that are making noteworthy progress towards a sustainable mandate but are not fully compliant with a sustainable label. These companies are committed to improving their environmental or social practices. By investing in companies that are working to improve their credentials, this label allows investors to support the transition toward more sustainable industries, contributing to long-term change.
Impact (Making a Measurable Difference)
The Impact label goes a step further by focusing on investments that deliver measurable, positive change. These funds target projects that directly reduce carbon emissions, fight inequality, or address critical social issues. These funds provide tangible proof of the difference they are making.
Mixed Goals
For those who want a balanced approach, these funds invest in a diverse range of projects, from environmental initiatives to social programs, balancing different goals to create a well-rounded portfolio. This label offers flexibility, allowing you to invest in funds that support a broad spectrum of positive change, making it ideal for those who want to contribute to multiple sustainability objectives.
Originally, these labels were expected to be in place by mid-2024. The FCA has extended the deadline to early 2025. This extension gives fund managers more time to ensure their products meet the new criteria, while also providing investors extra time to learn about the new options.
If you would like to review your financial planning, reconsider your longer-term goals whilst looking to invest in a sustainable manner, then contact the multi-award-winning Wingate Financial Planning team.
