ESG 4.1 Sustainability labels

1. (1)

   1Subject to ESG 4.1.1R(2), a firm must not make use of the following sustainability labels:

   1. (a)

      ‘Sustainability focus’;

   2. (b)

      ‘Sustainability improvers’;

   3. (c)

      ‘Sustainability impact’; or

   4. (d)

      ‘Sustainability mixed goals’.

2. (2)

   A manager may, from 31 July 2024, make use of a sustainability label in ESG 4.1.1R(1) where the manager is undertaking sustainability in-scope business in relation to a sustainability product:

   1. (a)

      that is not a feeder fund if it satisfies the requirements set out in ESG 4.2; or

   2. (b)

      that is a feeder fund if it satisfies the requirements in ESG 4.1.2R.

1Where a manager is undertaking sustainability in-scope business in relation to a sustainability product that is a feeder fund, it may use a sustainability label in relation to that product where:

1. (1)

   the feeder fund uses the same label as that used by the relevant master fund which is a sustainability product;

2. (2)

   the manager ensures that its use of the label is kept updated in accordance with any changes that the relevant master fund makes; and

3. (3)

   the manager ensures that it provides clients with easy access (for example, by providing hyperlinks) to the consumer-facing disclosure, pre-contractual disclosure (or Part A of a public product-level sustainability report in circumstances where the sustainability product does not have pre-contractual materials that relate to it) and Part B of a public product-level sustainability report that has been produced by the relevant master fund.

1As far as reasonably practicable, a manager must, where it makes use of a sustainability label, use the relevant graphic prescribed by the FCA:

1. (1)

   when displaying that label in relation to a sustainability product on the relevant digital medium for the business of the manager; and

2. (2)

   when disclosing the use of that label in a consumer-facing disclosure, a pre-contractual disclosure and Part B of a public product-level sustainability report.

1A manager that uses a sustainability label must not:

1. (1)

   use a sustainability label in a way that is misleading;

2. (2)

   claim in a public statement or to a client, either expressly or by implication, that:

   1. (a)

      the FCA has conferred or approved the use of a sustainability label in relation to a particular sustainability product; or

   2. (b)

      the manager’s use of a sustainability label indicates that a sustainability product has been approved or endorsed by the FCA; or

3. (3)

   publish information in relation to the use of, or descriptors pertaining to, a sustainability label which contradicts the information that has been published by the FCA.

1A manager that uses a sustainability label must:

1. (1)

   prepare and retain a record as to the basis on which the label has been used; and

2. (2)

   keep that record updated for the duration of the label’s use (including where the use of the label changes, as set out under ESG 4.1.11R and ESG 4.1.14R).

1A manager that intends to use a sustainability label in relation to a particular sustainability product, or to revise or cease the use of that label, must notify the FCA that it is doing so using the FCA’s online notification and application system, either before using, revising or ceasing the use of that label or as soon as reasonably practicable afterwards.

1. (1)

   1Where a manager uses a sustainability label in relation to a sustainability product and makes information about that product publicly available, it must publish on the relevant digital medium for the business of the manager:

   1. (a)

      the label that has been applied to the relevant sustainability product; and

   2. (b)

      details as to where the consumer-facing disclosure pertaining to that product can be easily accessed.

2. (2)

   A manager must locate the information at ESG 4.1.8R(1) in a prominent place on the specific webpage or page on a mobile application or other digital medium at which the sustainability product is offered.

1A manager that uses a sustainability label in relation to a sustainability product that is not a feeder fund must, in addition to the general ongoing requirements under ESG 4.2.20R, keep the use of that label under review by taking appropriate steps as follows:

1. (1)

   A manager must review its use of a sustainability label prior to any proposed change to a sustainability product and if, as a result of those changes, the product will cease to meet the criteria for using that label under ESG 4.2, revise or cease the use of the label as appropriate as soon as reasonably practicable;

2. (2)

   Notwithstanding ESG 4.1.11R(1), a manager must:

   1. (a)

      review its use of a sustainability label at least every 12 months to determine whether the use of the label continues to be appropriate, including in circumstances where the manager has taken steps under ESG 4.2.22R; and

   2. (b)

      where the manager determines that the continued use of the label is not appropriate, revise or cease the use of the label as appropriate as soon as reasonably practicable.

1A manager must prepare and retain a record of the fact that it has undertaken a review under ESG 4.1.11R and the decision it has reached as a result of that review regarding whether the sustainability label it has used remains appropriate.

1A manager must, where it is required to either revise the sustainability label that it uses or cease to use that label under ESG 4.1.11R:

1. (1)

   give written notice to its clients who have invested in that product that the sustainability label has been revised or ceased and the reasons for that revision or cessation as soon as reasonably practicable;

2. (2)

   publish the revised sustainability label (or the fact that the manager has ceased to use a label) and the reasons for the revision or cessation on the relevant digital medium for the business of the manager in a prominent place on the specific webpage or page on a mobile application or other digital medium at which the sustainability product is offered, as soon as reasonably practicable before that change takes effect; and

3. (3)

   ensure that a consumer-facing disclosure, pre-contractual disclosure and reports prepared by the manager under ESG 5.4 and ESG 5.5 are updated as soon as reasonably practicable, in accordance with the requirements under ESG 5.1.3R where relevant.

1If, in circumstances other than those set out in ESG 4.1.11R, a manager is no longer able to meet the general or specific criteria for using a sustainability label and must revise or cease the use of the label, it must take the steps under ESG 4.1.13R.

1Where a distributor distributes to retail clients a sustainability product which uses a sustainability label, the distributor must:

1. (1)

   communicate to those retail clients the same label that the manager undertaking sustainability in-scope business is using in relation to that product by either:

   1. (a)

      displaying the label on the relevant digital medium for the business of the distributor in a prominent place on the specific webpage or page on a mobile application or other digital medium at which the sustainability product is offered; or

   2. (b)

      where the distributor does not use a relevant digital medium, using the same channel(s) that the distributor would ordinarily use to communicate information; and

2. (2)

   ensure that retail clients are provided with access to a consumer-facing disclosure which relates to that product.

1Where a manager does not use a sustainability label but uses one or more of the terms listed in ESG 4.3.2R(2) in accordance with ESG 4.3.2R(1) in the name or a financial promotion relating to a sustainability product, a distributor of that product must ensure that retail clients are provided with access to the consumer-facing disclosure which relates to that product.

1A distributor that distributes a sustainability product to retail clients must ensure that its relevant digital medium, or any other channel(s) that the distributor would ordinarily use to communicate information, and any financial promotion relating to that product are kept updated in accordance with any changes that are made to the relevant sustainability label or to the consumer-facing disclosure which relates to that product.

1A distributor that distributes recognised schemes, including ETFs that are recognised schemes, to retail clients must:

1. (1)

   where the terms set out in ESG 4.3.2R(2) are used in either the name of a recognised scheme or a financial promotion relating to that scheme, prepare a notice which includes the following text: ‘This product is based overseas and is not subject to UK sustainable investment labelling and disclosure requirements’; and

2. (2)

   in relation to the relevant digital medium for the business of the distributor:

   1. (a)

      display the notice at ESG 4.1.19R(1) in a prominent place on the specific webpage or page on a mobile application or other digital medium at which the recognised scheme is offered; or

   2. (b)

      include a hyperlink to the relevant webpage of the FCA website which sets out for retail clients further information in relation to the sustainability labelling and disclosure requirements under ESG 4 and ESG 5; and

3. (3)

   where relevant, in relation to any other channel(s) that the distributor would ordinarily use to communicate information, notify retail clients using that means of communication.