Passive funds may face hurdles in UK’s new green fund regime

Concerns are mounting that passive, index-tracking funds might be notably absent from the UK’s forthcoming “green” fund regime, according to a recent report from the Financial Times. The Financial Conduct Authority’s (FCA) new Sustainability Disclosure Requirements (SDR), set to take effect at the end of July, mandate that funds marketed as sustainable must substantiate their claims with evidence.

However, compliance with the SDR rules may pose significant challenges for passive funds. The report highlights that no exchange-traded funds (ETFs) will be eligible for a “sustainable” label, as they are only available to UK-domiciled funds, while all ETFs accessible in the UK, including those listed on the London stock exchange, are domiciled overseas.