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’sonline 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 distributordistributes 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 distributesrecognised 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.

1A manager must, in order to use a sustainability label in relation to a sustainability product under ESG 4.1.1R(2)(a), ensure that both the general and specific criteria which relate to that particular label have been met and continue to be met on an ongoing basis.

1A sustainability product using a sustainability label must:

1. (1)

   have an explicit sustainability objective as part of its investment objectives that:

   1. (a)

      aligns with one of the sustainability labels set out under ESG 4.1.1R (as detailed further under ESG 4.2.13R, ESG 4.2.14R, ESG 4.2.16R and ESG 4.2.18R); and

   2. (b)

      is clear, specific and measurable;

2. (2)

   meet the following requirements:

   1. (a)

      at least 70% of the gross value of the product’s assets must be invested in accordance with its sustainability objective, except where:

      1. (i)

         the product is still to be fully invested in assets, as set out in the product’s investment strategy under ESG 4.2.9R(2)(b); or

      2. (ii)

         the manager is taking steps under ESG 4.2.22R.

   2. (b)

      the product’s assets must be selected with reference to a robust, evidence-based standard that is an absolute measure of environmental and/or social sustainability, as applicable under ESG 4.2.13R, ESG 4.2.14R and ESG 4.2.17R(1); and

   3. (c)

      where the product invests in assets that are not in accordance with its sustainability objective, those assets must not have attributes that conflict with that objective; and

3. (3)

   have robust and evidence-based key performance indicators (KPIs) that can demonstrate the product’s progress towards meeting its sustainability objective.

1A manager must, in addition to ensuring that a sustainability product meets the requirements set out in ESG 4.2.4R:

1. (1)

   determine whether pursuing that product’s sustainability objective could result in negative environmental and/or social outcomes;

2. (2)

   determine the sustainability product’s:

   1. (a)

      investment policy for achieving its sustainability objective; and

   2. (b)

      investment strategy for meeting the requirements under ESG 4.2.4R(2), including, where appropriate, the timescales by which the product is expected to be fully invested in assets;

3. (3)

   obtain or undertake an assessment of the standard referred to under ESG 4.2.4R(2)(b) to confirm that it is appropriate for determining which assets the product invests in, ensuring that:

   1. (a)

      the assessment, whether obtained from a third party or undertaken by the manager, is independent from the manager’s investment process; and

   2. (b)

      the individuals responsible for carrying out the assessment are appropriately skilled;

4. (4)

   identify any assets which the sustainability product invests in for reasons other than to pursue its sustainability objective;

5. (5)

   identify the KPIs that the manager will use for the purposes of ESG 4.2.4R(3);

6. (6)

   have an escalation plan setting out the actions that the manager will take if any of the sustainability product’s assets do not demonstrate sufficient performance against either the product’s sustainability objective or the KPIs under ESG 4.2.4R(3);

7. (7)

   in relation to the manager’s governance and resources, ensure that:

   1. (a)

      there are appropriate resources, governance and organisational arrangements in place, commensurate with enabling the sustainability product to achieve its sustainability objective;

   2. (b)

      there is adequate knowledge and understanding of the assets in which the sustainability product is invested; and

   3. (c)

      there is a high standard of diligence in the selection of any data or other information used (including when third-party ESG data or ratings providers are used) to inform investment decisions for the sustainability product; and

8. (8)

   in relation to investor stewardship:

   1. (a)

      identify the investor stewardship strategy needed to support the achievement of the sustainability product’ssustainability objective, including the activities which are expected to be undertaken and the outcomes which are expected to be achieved; and

   2. (b)

      ensure that the investor stewardship strategy and appropriate resources are applied in order to support the achievement of the sustainability objective.

1A manager must, with respect to a sustainability product that is an index-tracking product, only use an index that has a methodology which is aligned with the product’s sustainability objective and the requirements in ESG 4.2.4R(2).

1A manager must, in addition to the general criteria under ESG 4.2.4R to ESG 4.2.11R, ensure that a sustainability label is only used in relation to a sustainability product if the product meets the specific criteria applicable to that label.

1A manager may only use the ‘sustainability focus’ label where the sustainability product’ssustainability objective is consistent with the aim of investing in assets that are environmentally and/or socially sustainable, determined using the robust, evidence-based standard set out under ESG 4.2.4R(2)(b).

1A manager may only use the ‘sustainability improvers’ label where the sustainability product’ssustainability objective is consistent with the aim of investing in assets that have the potential to improve environmental and/or social sustainability over time, determined by the potential of those assets to meet the robust, evidence-based standard set out under ESG 4.2.4R(2)(b).

1A manager must, in relation to the use of the sustainability label ‘sustainability improvers’:

1. (1)

   identify the period of time by which the product and/or the assets in which the product invests is expected to meet the robust, evidence-based standard set out under ESG 4.2.4R(2)(b);

2. (2)

   identify short and medium-term targets for improvements in the sustainability of the product and/or the assets in which the product invests, commensurate with the investment horizon of the product; and

3. (3)

   obtain robust evidence to satisfy itself that the assets in which the product invests have the potential to meet the robust, evidence-based standard set out under ESG 4.2.4R(2)(b).

1A manager may only use the ‘sustainability impact’ label where the sustainability product’ssustainability objective is consistent with the aim of achieving a pre-defined, positive, measurable impact in relation to an environmental and/or social outcome.

1A manager must, in relation to the use of the sustainability label ‘sustainability impact’:

1. (1)

   specify a theory of change in line with the product’s sustainability objective, describing how the manager expects its investment activities and the product’s assets to contribute to achieving a positive and measurable impact, in accordance with the robust, evidence-based standard set out under ESG 4.2.4R(2)(b) where the manager considers it appropriate; and

2. (2)

   specify a robust method to measure and demonstrate that the manager’s investment activities and the product’s assets are achieving a positive environmental and/or social impact.

1A manager may only use the ‘sustainability mixed goals’ label where the sustainability product’ssustainability objective is to invest in accordance with 2 or more of the sustainability objectives in ESG 4.2.13R, ESG 4.2.14R and ESG 4.2.16R.

1A manager must, in relation to the use of the sustainability label ‘sustainability mixed goals’:

1. (1)

   identify the proportion of assets which are invested in accordance with each of the 2 or more sustainability objectives referred to in ESG 4.2.18R; and

2. (2)

   meet the requirements (as relevant) under ESG 4.2.15R and ESG 4.2.17R.

1A manager must ensure that the general and specific criteria with respect to using a sustainability label are met on an ongoing basis, in particular:

1. (1)

   The manager must ensure that:

   1. (a)

      the requirements in ESG 4.2.4R continue to be met;

   2. (b)

      the sustainability product’s investment policy, strategy and escalation plan under ESG 4.2.9R(2) and ESG 4.2.9R(6) are updated as appropriate;

   3. (c)

      the independent assessment obtained under ESG 4.2.9R(3) remains valid;

   4. (d)

      the manager continues to maintain appropriate governance and resources in accordance with the requirements under ESG 4.2.9R(7); and

   5. (e)

      the manager continues to maintain an appropriate investor stewardship strategy and apply that strategy and its resources in accordance with the requirements under ESG 4.2.9R(8); and

2. (2)

   The manager must:

   1. (a)

      monitor whether pursuing the sustainability product’ssustainability objective could result in negative outcomes that have not already been identified under ESG 4.2.9R(1).

   2. (b)

      monitor whether the sustainability product is investing in assets that pursue its sustainability objective and identify any new assets that have not already been identified under ESG 4.2.9R(4); and

   3. (c)

      monitor the ongoing performance of the sustainability product in achieving its sustainability objective, measured against the product’s KPIs set out under ESG 4.2.4R(3).

1A manager must, in relation to a sustainability product that is an index-tracking product, ensure that the index continues to meet the requirements of ESG 4.2.4R(2) when that index is rebalanced.

1. (1)

   1A manager must, when ensuring the matters set out in ESG 4.2.20R are met:

   1. (a)

      apply, as appropriate, its escalation plan under ESG 4.2.9R(6) where the product’s assets do not demonstrate sufficient performance against the product’s sustainability objective and/or the KPIs under ESG 4.2.4R(3); and

   2. (b)

      subject to ESG 4.2.25R, ensure that, if a sustainability product ceases to meet the general or specific criteria with respect to using a sustainability label, it takes action to restore compliance as soon as reasonably practicable.

2. (2)

   A manager that is undertaking the steps set out in ESG 4.2.22R(1) will be complying with the general and specific criteria with respect to using a sustainability label.

1A manager must, where the steps taken under ESG 4.2.22R are not sufficient for ensuring ongoing compliance with the general and specific criteria:

1. (1)

   revise or cease the use of a sustainability label as soon as reasonably practicable; and

2. (2)

   take the steps set out under ESG 4.1.13R.

1Where a manager uses a sustainability label in relation to a sustainability product, it must take reasonable steps to ensure that the data it is relying upon in order to meet the requirements under ESG 4.2 is accurate and complete (including using proxies and assumptions where appropriate).

1. (1)

   1This rule applies to a firm (whether it is undertaking sustainability in-scope business or not) which:

   1. (a)

      communicates with a client in the United Kingdom in relation to a product or service; or

   2. (b)

      communicates a financial promotion to, or approves a financial promotion for communication to, a person in the United Kingdom.

2. (2)

   A firm must ensure that any reference to the sustainability characteristics of a product or service is:

   1. (a)

      consistent with the sustainability characteristics of the product or service; and

   2. (b)

      fair, clear and not misleading.

1. (1)

   1A manager that is undertaking sustainability in-scope business for retail clients in relation to a sustainability product must comply with the requirements in ESG 4.3.4R to ESG 4.3.8R where the manager uses the terms in ESG 4.3.2R(2) in either the sustainability product’s name or in a financial promotion in relation to the sustainability characteristics of that product.

2. (2)

   For the purposes of ESG 4.3.2R(1), the relevant terms are:

   1. (a)

      ‘ESG’ (or ‘environmental, social and governance’);

   2. (b)

      ‘environment’, ‘environmental’ or ‘environmentally’;

   3. (c)

      ‘social’ or ‘socially’;

   4. (d)

      ‘climate’;

   5. (e)

      ‘sustainable’ or ‘sustainability’;

   6. (f)

      ‘green’;

   7. (g)

      ‘transition’;

   8. (h)

      ‘net zero’;

   9. (i)

      ‘impact’;

   10. (j)

       ‘responsible’;

   11. (k)

       ‘sustainable development goals’ or ‘SDG(s)’;

   12. (l)

       ‘Paris-aligned’; and

   13. (m)

       any other term which implies that a sustainability product has sustainability characteristics.

3. (3)

   A manager may use the terms in ESG 4.3.2R(2):

   1. (a)

      to make short factual statements which are not financial promotions; or

   2. (b)

      to make statements in a context not intended to refer to, or describe, the sustainability characteristics of a sustainability product.

1. (1)

   1A manager that uses a sustainability label in relation to a sustainability product (other than a feeder fund) may use the terms set out in ESG 4.3.2R(2) in the product’s name provided that the manager complies with ESG 4.3.4R(2).

2. (2)

   Where a manager is using a ‘sustainability focus’, ‘sustainability improvers’ or ‘sustainability mixed goals’ sustainability label, the manager must not use the word ‘impact’ in the product’s name.

1A manager that is undertaking sustainability in-scope business and does not use a sustainability label in relation to a sustainability product (other than a feeder fund) may use the terms set out in ESG 4.3.2R(2) in the product’s name provided that the following conditions are met:

1. (1)

   The sustainability product must:

   1. (a)

      have sustainability characteristics and a name which accurately reflects those characteristics; and

   2. (b)

      not, in its name, use the terms ‘sustainable’, ‘sustainability’ or ‘impact’ or any other variation of those terms to refer to the sustainability characteristics of the product.

2. (2)

   The manager must produce:

   1. (a)

      a consumer-facing disclosure;

   2. (b)

      a pre-contractual disclosure (or Part A of a public product-level sustainability report in circumstances where the product does not have pre-contractual materials that relate to it); and

   3. (c)

      Part B of a public product-level sustainability report.

3. (3)

   The manager must publish the following information 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:

   1. (a)

      an explanation as to the purpose of a sustainability label, using either the standard text – ‘Sustainable investment labels help investors find products that have a specific sustainability goal’ – or alternative text which reflects the substance of the standard text;

   2. (b)

      a statement as to the fact that the product does not use a sustainability label, using the text: ‘This product does not have a UK sustainable investment label’; and

   3. (c)

      a brief explanation as to why the product does not use a sustainability label.

1A manager that is undertaking sustainability in-scope business in relation to a sustainability product that is a feeder fund must, where it intends to use the terms in ESG 4.3.2R(2) in the product’s name, ensure that:

1. (1)

   the feeder fund uses only terms that are consistent with those used by the relevant master fund which is a sustainability product;

2. (2)

   the manager provides clients with easy access (for example, by providing hyperlinks) to the information set out under ESG 4.3.5R(2), produced by the relevant master fund; and

3. (3)

   the manager complies with the requirements of ESG 4.3.5R(3).

1. (1)

   1This rule applies to a manager which communicates a financial promotion to a retail client in the United Kingdom.

2. (2)

   A manager must ensure that any financial promotion relating to a sustainability product is consistent with (if any) the sustainability label, consumer-facing disclosure, pre-contractual disclosure and Part B of a public product-level sustainability report relating to that product.

3. (3)

   Where a manager is not using a sustainability label in relation to a sustainability product but communicates the terms in ESG 4.3.2R(2) in a financial promotion relating to that product, it must:

   1. (a)

      in relation to a sustainability product which is not a feeder fund, comply with the requirements in ESG 4.3.5R(2) and ESG 4.3.5R(3); and

   2. (b)

      in relation to a sustainability product which is a feeder fund, comply with the requirements of ESG 4.3.7R(1) to ESG 4.3.7R(3).