FCA sustainability labels for investments

If you have seen words like "sustainable", "green" or "impact" on an investment fund and wondered what they actually commit the fund to, the FCA's sustainability labels are the thing to look for. The Financial Conduct Authority (FCA) introduced four labels for UK investment funds, and from 31 July 2024 you can start seeing them on funds which have sustainable characteristics and whose managers choose to apply one¹. The labels are part of a wider package of rules called the Sustainability Disclosure Requirements (SDR), designed to help reduce greenwashing, meaning exaggerated, misleading or unsubstantiated sustainability claims, and to make it easier for investors to find funds that match what they are looking for². The regime followed years of policy work on consumer transparency in financial services, including a government consultation response on improving transparency for consumers³.

The four labels are Sustainability Focus, Sustainability Improvers, Sustainability Impact and Sustainability Mixed Goals². Each one signals a different approach: investing in assets that are already sustainable, investing in assets that are trying to become more sustainable, investing in assets that directly make a positive difference, or a mixture of these. Using a label is optional, so a fund without a label is not necessarily an unsustainable fund; it may simply not have applied for one, or may fall outside the regime altogether.

The four labels: Focus, Improvers, Impact and Mixed Goals

The FCA has introduced four labels to help investors recognise funds with a specific environmental and/or social goal⁸. Each label describes a different kind of promise, and the differences between them matter when you are deciding what a fund is actually doing with your money.

A Sustainability Focus fund is the closest thing to a fund of assets that are already sustainable. Which?'s guidance describes these as funds investing in assets meeting a robust, evidence-based standard of sustainability⁵. A Sustainability Improvers fund takes a different route: it invests in assets that have the potential to meet such a standard, in other words companies or projects that are on a journey towards sustainability rather than already there⁵. Quilter describes these products as investing mainly in assets that may not be sustainable now but aim to improve their sustainability⁹.

Sustainability Impact sits apart again. These funds invest in assets directly making a positive impact⁵, and the label carries an extra privilege: under the naming rules, only Sustainability Impact funds can use the word "impact" in their name⁷. Sustainability Mixed Goals is the fourth label, for funds that invest in a mix of the other styles⁵. Quilter describes these products as investing mainly in a mix of assets that either focus on sustainability, aim to improve their sustainability over time, or aim to achieve a positive impact for people or the planet⁹.

The labels apply to UK-domiciled funds. The FCA has introduced four labels for UK-based funds¹⁰, and UK-domiciled funds that use one of the four approaches will use a sustainability label². If you invest through a platform, you may see the label on the fund's page or in its documents. For example, one provider's junior ISA product information pack notes that the underlying fund has adopted the FCA's Sustainability Mixed Goals label, and that the label applies to the underlying fund rather than to the ISA product itself¹¹. That distinction is worth remembering: a label always belongs to the fund, not to the wrapper (such as an ISA) you hold it in.

At least 70% of a labelled fund must match its sustainability goal

The single most concrete rule behind every label is a threshold. At least 70% of the investments in a fund must meet the sustainability objective set out by the fund's manager⁵. Which? reported in October 2025 that the FCA's criteria for adopting a label include a requirement that usually at least 70% of the product's assets must be invested in accordance with the chosen sustainability objective⁴. Hargreaves Lansdown puts the same rule in its own words: to use any of the four labels, at least 70% of the fund must be invested in line with the sustainability objective⁷.

That leaves the rest of the fund. The remaining 30% of assets can't be in conflict with the objective, although they don't have to meet it exactly⁵. This is the part of the rule that surprises people: a labelled fund is not a fund where every holding is sustainable. Up to three tenths of it can be invested in assets that simply do not advance the objective, provided they do not work against it. Standard Life's guidance states the same threshold from the manager's side: the investment policy and strategy set clear expectations that at least 70% of the investments in a fund need to align to its sustainability objective¹².

In practice, the 70% rule is what stops a label being purely a marketing badge. A fund manager cannot take the label and then fill the fund with whatever it likes; most of the portfolio has to be answerable to the stated objective, and the fund's disclosures have to show how. But the rule also sets the limit of what the label tells you. It is a floor, not a description of every holding, and the treatment of the remaining assets is something to check in the fund's own documents rather than assume.

What a fund must show to earn a label

Earning a label is not just a matter of a manager liking the sound of one. To qualify, a product must have a sustainability objective that is clear, specific, measurable and included in the product's investment objectives⁹. Bestinvest states the same test: a product must have a sustainability objective that is clear, specific, and measurable and included in the product's investment objectives¹³. That requirement does real work. "Clear" means an ordinary investor can read it and understand what the fund is trying to achieve; "specific" means it is not so vague that almost anything could count; "measurable" means progress can actually be checked.

The sustainability objective itself has a defined legal character. It is an explicit statement of intention to invest "with the aim of directly or indirectly improving or pursuing positive environmental and/or social outcomes"¹³. So the objective is not a side note in a brochure; it is built into the product's investment objectives, the documents that govern what the fund is for.

Beyond the objective, there are ongoing obligations. Fund managers need to provide clear and simple information on the fund's goal, how they'll achieve it and annual updates on its progress⁸. AJ Bell summarises the position simply: to qualify for a label, a fund must meet certain sustainability criteria¹⁴. The criteria are set by the FCA, and they are the reason a label carries more weight than a fund simply describing itself as green in its marketing.

It is worth comparing this with the looser language you will also see on funds. The requirements for using the term "ESG" are not as strict as they are for "sustainable", so a fund using it could mean multiple things⁵. ESG-labelled funds don't need to have a specific sustainability objective in mind, as the sustainable label funds do⁵. An ESG fund may, for example, simply take environmental, social and governance factors into account when picking investments, without committing to any particular outcome. That is a legitimate approach, but it is a different and weaker promise than a label, and the two should not be confused when comparing funds.

What a label promises, and what it does not

A label promises something about how a fund invests and what its manager is trying to achieve. It promises nothing about risk or returns. The labels exist to help investors recognise funds with a specific environmental and/or social goal⁸; they are not a mark of safety, a guarantee of performance, or a sign that a fund is in any way lower risk. A labelled fund holds shares, bonds or other assets, and its value can fall as well as rise like any other fund. If you are weighing up risk, the fund's own risk information and our page on investment risk and your attitude to risk are the places to look, not the label.

The label also does not tell you how effective the fund is at achieving a given goal, only that it meets the criteria for the label it uses. Which? has looked at the question of returns directly, including whether investing ethically harms them⁴, and the honest position is that performance depends on the underlying investments and the manager's skill, not on the label.

What the labels do change is naming. Only funds with a label are allowed to use the term "sustainability", or any variation of that word, in their names, and only Sustainability Impact funds can use the term "impact"⁷. This is a significant tightening. Before the regime, a fund could call itself sustainable without meeting any standard; now the word in a fund's name is tied to the labelling criteria. Since 2024, the FCA has required that UK funds wanting to use certain terms have to adopt one of its sustainable investment labels¹⁵.

There are also limits to the regime's reach. It's important to note that overseas funds are not subject to SDR, but the FCA is working to include them within the scope of the regime⁷. Funds based outside the UK, and different types of funds such as pension funds, are not in scope¹³. So a fund you can buy on a UK platform that is domiciled overseas may carry sustainability language without any label and without meeting the labelling criteria. That is not necessarily a sign of greenwashing, but it does mean the label's protections cannot be assumed to apply.

The anti-greenwashing rule and what firms must be able to prove

The labels sit alongside a second, broader rule: the anti-greenwashing rule. It applies to all FCA-authorised firms who make sustainability-related claims about products and services¹³. Hargreaves Lansdown describes it as clarifying that the sustainability-related claims made by firms must be fair, clear and not misleading⁷. The rule was introduced on 31 May 2024 and applies to all products and services provided by FCA-regulated companies⁶.

The rule matters because it reaches further than the labels. A fund does not need a label for the rule to bite: any authorised firm describing anything as green, sustainable or ethical, in a factsheet, on a website or in an advert, must be able to back that description up. The claim must be fair (a fair representation of what the product does), clear (not buried in caveats or jargon) and not misleading (not implying a benefit the product does not deliver). The FSCS, the UK's compensation scheme, has also warned consumers to be alert to greenwashing when choosing investments¹⁶.

The rule has a history. On 25 October 2022 the FCA published a consultation paper proposing a package of new measures designed to clamp down on greenwashing, including how terms like "ESG", "green" or "sustainable" can be used¹⁶. The labels and the anti-greenwashing rule are the outcome of that work, alongside wider government efforts to improve transparency for consumers in financial services³. For a fuller explanation of how misleading sustainability claims work and how to spot them, see our page on greenwashing in investments.

For an investor, the practical effect is that sustainability claims you read from FCA-authorised firms are supposed to be provable, not decorative. If a firm says a fund avoids certain industries, or targets a certain outcome, it must be able to substantiate that claim if the FCA asks. That is the standard against which a suspicious claim can be judged, and the basis on which a complaint can be made.

Reading a fund's disclosure document and annual updates

A label comes with paperwork, and the paperwork is where the substance lives. Funds that use a label will also have a "UK Sustainable Investment Labelling Disclosure Document", which will explain the sustainability approach the fund takes¹⁰. This is the document to read if you want to know what the label means for that particular fund: what its sustainability objective is, how the manager intends to meet it, and how the rest of the fund is handled.

Beyond the labelling document, there is a wider disclosure obligation. Every fund and investment trust using language to imply they have ethical credentials has to supply a "sustainability factsheet" which sets out their objectives, approach and metrics⁵. So even funds without a label, but which use ethical-sounding language, must publish something structured about their sustainability claims. Fund managers also need to provide clear and simple information on the fund's goal, how they'll achieve it and annual updates on its progress⁸.

Adoption is still growing. According to Which? research, there are currently around 145 funds using or planning to use these labels in the UK, and so far 93 of the 145 funds have made a public disclosure, according to Morningstar⁴. That figure, from October 2025, means many funds that intend to use a label had not yet published their disclosures at that point. If a fund carries a label but you cannot find its disclosure document, that is worth querying with the provider.

When you read these documents, the things worth checking are the sustainability objective (is it specific enough to mean anything?), the 70% alignment (what counts as aligned?), and the treatment of the remaining assets. Our page on fund documents: KIDs, KIIDs, factsheets and prospectuses explains where these fit among the other documents a fund publishes. If you hold investments through a platform, the documents are usually available to download from the fund's page; our guide to how investment platforms work covers where to find them.

Where the protection stops, and where to get help

The labels and the anti-greenwashing rule are about honest description, not about protecting the value of your money. A labelled fund can perform badly, and no rule compensates you for a fund simply falling in value; our page on whether FSCS covers poor investment performance explains where the line sits. The FSCS, the UK's compensation scheme, steps in when an authorised firm fails, not when an investment disappoints¹⁷, and our page on what happens if an investment platform fails covers that scenario.

The protection also stops at the border of the regime. Overseas funds are not subject to SDR⁷, and funds based outside the UK or of types such as pension funds are outside the labelling regime's scope¹³. A pension fund's sustainability approach is governed by different rules and disclosures, so the absence of a label there means nothing either way.

If you think a fund's or a firm's sustainability claims are misleading, there is a route to challenge them:

1. Complain to the firm first, setting out the claim you believe is misleading and why.
2. If the firm does not resolve it to your satisfaction, take the complaint to the Financial Ombudsman Service, which handles complaints against FCA-authorised firms and was the subject of a recent government review of its role and coverage¹⁸.
3. If you believe you were misled into buying an investment in the first place, that may be a question of mis-selling rather than greenwashing; our page on mis-sold investments and bad investment advice explains that process.

The FCA's own position on firms that break its rules is that it will act. It has stated: "Where necessary, we will use our supervisory and enforcement powers to ensure that customers are protected from poorly performing firms."¹⁶ The anti-greenwashing rule, in force since 31 May 2024, is the specific rule a sustainability claim can be tested against⁶.

Finally, a label is one input among many when choosing a fund. The label tells you the fund has a sustainability objective and that most of its assets align to it; it does not tell you about charges, risk, performance or whether the fund suits your goals. Those questions are covered in our guides to fund charges and the ongoing charges figure, ethical, sustainable and impact funds and their providers and the wider investing guide.