Some 115 funds dropped ESG-related terms from their names in 2024 as the industry grapples to comply with the Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR), according to a new report from Morningstar.
A further 48 swapped ESG-related terms, with another 50 adding ESG-related terms to their branding.
The deadline for funds to readjust their marketing in line with SDR may have passed on 2 December last year, but analysts at Morningstar “expect an acceleration of rebranding activity in the coming months” as more funds seek to comply with the European Securities and Markets Authority’s (ESMA) naming guidelines on 21 May.
The firm anticipates between 30% to 50% of European ESG funds to change their names by mid-2025, with 4,700 funds falling within the scope of the ESMA guidelines.
Inflows into global sustainable funds hit a low of $36bn in 2024 – a far cry from the $645bn raised at their peak in 2021.
Yet Morningstar Sustainalytics’ head of sustainable investing research Hortense Bioy said the sector faces many more changes in the year ahead.
“2025 might be a reset year, with anti-greenwashing rules reshaping the ESG fund market, companies re-affirming or rolling back their sustainability initiatives, and governments reviewing their priorities amid a changing geopolitical and economic landscape,” she added. “These are new developments that sustainability-focused investors will have to navigate.”