The FCA has released the ESG labels to be used by fund managers and other authorised firms that market sustainable investment products.

They are part of the wide package of measures introduced by the regulator to improve the trust and transparency of sustainable investment products and reduce greenwashing.

The measures include an anti-greenwashing rule that applies to all FCA-authorised firms who make sustainability-related claims about financial products and services.

The measures also include the investment labels, disclosure and naming and marketing rules that apply to UK asset managers as well as targeted rules that apply to distributors of investment products to retail investors in the UK.

The four new ESG labels (pictured above) are as follows:

• Sustainability Improvers, which should aim to invest in assets that have the potential to improve environmental and/or social sustainability over time
• Sustainability Focus, which should aim to invest in assets that are environmentally and/or socially sustainable
• Sustainability Impact, which should aim to achieve a pre-defined, positive, measurable impact in relation to an environmental and/or social outcome
• Sustainability Mixed Goals, which should invest at least 70 per cent in line with a combination of the sustainability objectives for the other label

Funds that have labels will also need to give consumers clear and simple information, including what the sustainability goal of the fund is; the approach to achieving it; and annual updates on progress towards the goal.

The FCA said firms should consider the regime and, where relevant, take steps ahead of the labelling rules coming into effect. 

The rules and guidance come into force on the following dates: 

• Since the end of July firms have been able to use labels, with accompanying disclosures
• From 2 December naming and marketing rules come into force, with accompanying disclosures
• From 2 December 2025 the introduction of ongoing product-level and entity-level disclosures for firms with AUM more than £50bn
• From 2 December 2026 entity-level disclosure rules are extended to firms with AUM more than £5bn.

The FCA said it will not be approving use of the labels, but it warned it may need to approve changes to pre-contractual disclosures as a result of the firm’s decision to use the label. Firms are responsible for making their assessment against the criteria for a label. It said it will apply its usual supervisory and enforcement approaches to the regime.