‘Sustainable investing’ describes investment options that focus significantly on environmental and social issues, alongside financial considerations, as part of their strategy.
These options largely emerged out the ethical investment fund area, which were first available to individual investors in 1984. These early funds trail blazed the idea that individual investors might want to reflect their personal preferences, opinions and hopes for the future when deciding where to invest.
There is – and always was – significant overlap between these strategies, however in broad terms ethical funds tend to be more focused on values related issues, like armaments and animal welfare – and sustainable funds tend to take a more forward looking approach to environmental and social (sustainability) issues. Both consider ‘ESG’ – environmental, social and governance – issues and risks and opportunities. Both may invest widely – across many different industries.
There are now rules in the UK that dictate whether or not a fund can call itself a ‘sustainable investment’, or have certain terms in its name. These are published in the FCA’s Sustainability Disclosure Requirements (SDR).
SDR directs sustainable funds (in the UK) to help deliver positive real world sustainability outcomes, through where assets are invested and how they operate. Relevant funds must also publish or ‘disclose’ additional information for the benefit of clients and others..
There are of course many different ways investors can help deliver positive real world outcomes. The SDR fund labelling regime helps people recognise and understand fund approaches.
This area is however a little confusing at present because not all options are ‘in scope’ – covered by – the new SDR rules. Portfolios and overseas funds are currently out of scope – although all of the investment industry is required to ensure clients are not misled. The ‘anti greenwash’ rule, which is part of SDR, describes this further.
In addition many funds that focus on sustainability have chosen not to use labels. Such options are often referred to as ‘unlabelled with sustainability characteristics’. Our SDR page explains further.
Sustainable investment strategies (irrespective of SDR status) are a combination of the product specific issues the strategy considers, and the approach(es) applied to those issues. In other words ‘what’ the strategy considers and ‘how’ it is dealt with. There are many different sustainability related issues, risks and opportunities, and different people and fund managers chose to respond to different aspects.
This is why sustainable investing is a highly diverse area, and interested parties should always look closely at investment policies and strategies – which are a combination of individual product policies and the strategies and commitments that apply to the assets managed by the fund management company.
This is why we include both ‘product’ and ‘corporate’ options on the Fund EcoMarket database.
Although strategies very, they can be clustered into client friendly groups – to help describe key differences.
The Fund EcoMarket ‘SRI Styles‘ categories are designed to help users recognise key similarities and differences between options. This includes, for example, whether it focuses on environmental, social or ethical issues – or a combination. The SRI Stylefinder questionnaire is designed to help users identify their preferred styles.
These are however only a basic starting point to be considered alongside the product and corporation specific information on the database. It is also important not to confuse this information with the FCA’s SDR Labels.
In March 2025 the British Standards Institute (BSI) published a free to dowload ‘publicly available specification’ for retail sustainable funds: ‘PAS 7342:2025 Sustainable investment funds. Design, implementation, monitoring and communication of sustainability attributes’.
This is a technical specification that describes in some detail ‘what good looks like’ in retail sustainable fund investing and is helpful for those wanting to understand this area.
PAS 7342 was joint sponsored by government / DESNZ and industry. SRI Services’ founder Julia Dreblow was it’s technical author.
The PAS standard includes an extensive glossary. Some key definitions are below:
‘sustainability issue’
topic, concern, risk and/or opportunity considered by fund managers to be sustainability related
NOTE These are primarily environmental or social issues; however, governance is also important. These are
expected to be articulated in a fund’s sustainability policy and strategy.
‘sustainability’
responding responsibly to the finite nature of environmental resources with regard to the needs of
current and future generations
NOTE 1 A sustainable activity is one that can continue indefinitely as it is not dependent on the use of resources
that cannot be replaced.
NOTE 2 In the context of sustainable investment, sustainability comprises both environmental and social
considerations. This interpretation is derived from the 1987 United Nations Brundtland Commission Report [7].
3) Global Impact Investing Network, What you need to know about impact investing. Available from
https://thegiin.org/publication/post/about-impact-investing.
‘sustainability objective’
statement of intention to undertake activities with the aim of directly or indirectly improving or
pursuing positive environmental and/or social outcomes
[SOURCE: FCA Sustainability Disclosure Requirements, PS23/16, Annex A [2]]
‘sustainable investment’
alignment of an investment strategy to forward looking environmental and/or social sustainability
objectives alongside financial goals
NOTE Assets are selected based on the products or services they offer and/or other sustainability attributes.
‘sustainable investing’
process of undertaking sustainable investment (3.23)
‘sustainable investment fund’
fund that is managed in line with a sustainable investment strategy
Additional terms are described in the ‘SRI Services glossary’ here.