The term ‘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 concerned about values related issues, like armaments and animal welfare – and sustainable funds tend to have more of a 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 rule in the UK that dictate whether or not a fund can call itself a ‘sustainable investment’. These are set out in the FCA’s Sustainability Disclosure Requirements (SDR).
Sustainable funds (in the UK) must aim to help deliver positive real world sustainability outcomes, through where they invest and how they operate, as well as meeting additional disclosure requirements.
There are of course many different ways investors can help deliver positive real world outcomes. The SDR fund labelling regime aims to capture core differences by offering four different labels.
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 not chosen to use labels. Our SDR page explains further.
Sustainable investment strategies (irrespective of SDR status) are a combination of the issues the strategy considers, and the approach the manager applies 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 level and corporate level options on the Fund EcoMarket database.
The Fund EcoMarket ‘SRI Styles‘ categories are designed to help users identify the core differences between options – such as 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 ‘SRI Styles’ are however only intended to help users to get started in this area. Strategies vary so, the this information should be viewed alongside product and corporate options – the information for which is supplied by fund managers. It is also important not to confuse these with the FCA’s SDR Labels .
The British Standards Institute (BSI) offers a free specification for retail sustainable funds: ‘PAS 7342:2025 Sustainable investment funds. Design, implementation, monitoring and communication of sustainability attributes’.
This s a technical specification that describes in some detail ‘what good looks like’ in retail sustainable fund investing.
It includes a glossary, some examples useful 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