Now, some firms are opting to drop the word from their products, citing pressure to 'second-guess regulatory changes'.
Other firms are signing up to new sustainable labels aimed to make it easier for investors to spot funds with high standards of sustainability.
Here, we take a look at some of the affected funds and what it means if you'd like your money to do some good while it grows.
Please note: the content contained in this article is for information purposes only and does not constitute financial or investment advice.Why names matter in investing
Data from Morningstar showed sustainable is the most commonly dropped investment fund term so far in 2024.
The new rules are most strict around the use of the words sustainable and impact, and only funds with an Financial Conduct Authority (FCA) issued label will be able to use them.
Other more vague terms like ESG (environment, social, and governance) still require firms to explain what the fund is invested in and why they're using those terms.
If the name change is confusing to you because you thought you were investing in a sustainable fund, read through the Key Investor Information Document (KIID) that tells you how the fund chooses investments and what sustainability criteria they consider.
Find out more:Which funds are changing?
The world’s second largest asset manager, Vanguard, confirmed changes to five of its funds. The Vanguard SustainableLife Equity Funds will be dropping sustainable from their names and changing to ‘ActiveLife Climate Aware’.
The change notice on the funds says: ‘The funds are still ESG funds even though they do not have a label. They do still have sustainable characteristics, and they do still consider ESG factors in the investment process.’
Other popular funds have changed their names, including Fidelity Sustainable Emerging Markets Ex China which has dropped sustainable, Jupiter Sustainable Equities has changed to Jupiter Global Leaders, and the Abrdn MyFolio Sustainable funds will become MyFolio Enhanced ESG.
Fund manager Stewart Investors is similarly removing all sustainable mentions from its fund names, and said in a letter to clients: ‘We would like to be known as Stewart Investors, not “Stewart Investors Sustainability”.
‘Regulatory approaches are changing quickly and unpredictably and will likely continue to do so. We would rather focus on improving our own approach to sustainable investment than lose focus trying to second-guess regulatory changes. Removing the word ‘sustainability’ helps us in this regard too.’
There are likely more changes to come, and the deadline to meet these new rules has been extended from December to 2 April 2025.
Find out more:Funds applying for sustainable labels
There are 12 investment products currently intending to use one of the FCA's four sustainability labels, though just four are publicly named so far.
Beyond this, a ‘healthy pipeline’ of firms have expressed interest to the FCA to use a label in the future and are making preparations.
The four funds that have so far publicly announced they’ll be using a label are:
The Jupiter Ecology Fund has a ‘sustainability focus’ label, for funds investing only in assets that meet ‘a robust, evidence-based standard of sustainability'. All three of the others have a ‘sustainability impact’ label, for funds that invest in assets directly making a positive impact. The funds cover only the real estate and ecology sectors.
AEW UK Impact Fund and Schroders Capital Real Estate Fund are only open to professional investors.
No funds have yet signed up to the ‘sustainability improvers’ label, for funds driving companies towards meeting a sustainability target, and ‘sustainability mixed goals’, which covers a combination of strategies.
How to invest and save sustainably
The FCA's labels will make it easier to pick sustainable funds, once (and indeed if) enough funds are signed up. But until then consider the following:
Check the fund's holdings Find a financial adviser who specialises in sustainable investments – Put your money in a bank that doesn’t fund climate changeCheck where your pension is investedsource https://www.which.co.uk/news/article/why-sustainable-is-being-dropped-from-investment-fund-names-avwXC3w3t1WJ