"Sustainable" in a fund's name: what the rules now require

Published 24 October 2026 · Responsible finance, decoded

For most of the last decade, the word "sustainable" in a fund's name was a marketing decision. A fund could hold the same oil majors as its conventional sister fund and still put a leaf in its logo. That era is ending. Regulators on both sides of the Atlantic now attach numbers to the words, and the numbers are high enough to force portfolio changes. Here is what the main regimes require, in plain language.

European Union: the 80% rule for ESG names

In May 2024 the European Securities and Markets Authority (ESMA) published guidelines on the use of ESG and sustainability-related terms in fund names. They applied from 21 November 2024 to new funds, and existing funds had a transition period until 21 May 2025.

• 80% threshold. A fund using an ESG, environmental, social, impact or sustainability term in its name must use at least 80% of its investments to meet the environmental or social characteristics, or the sustainable objectives, it promotes.
• Exclusions. Funds with environmental, impact or sustainability terms must apply the exclusions of the EU's Paris-aligned Benchmarks, which rule out companies above set revenue thresholds from coal, oil and gas. Funds using "transition", "social" or "governance" terms apply the lighter Climate Transition Benchmark exclusions.
• Transition funds must also show a clear and measurable path towards transition, rather than simply holding companies that say they intend to change.

The practical effect was visible in 2025: many funds either sold holdings to meet the exclusions, or quietly dropped "ESG" or "sustainable" from their names.

What comes next in the EU: SFDR 2.0

The naming guidelines sit on top of the Sustainable Finance Disclosure Regulation (SFDR), whose "Article 8" and "Article 9" categories became, against their designers' intentions, de facto labels. On 20 November 2025 the European Commission proposed a revision that would replace them with three product categories: sustainable, transition and ESG basics, each requiring at least 70% of the portfolio to follow the stated strategy, with only qualifying products allowed to use sustainability terms in their names and marketing. It is a legislative proposal: Parliament and Council can still change the thresholds, and the existing regime applies until a new text is adopted and in force.

United Kingdom: four labels, and an anti-greenwashing rule for everyone

The Financial Conduct Authority's Sustainability Disclosure Requirements (SDR) took a different route. Labels are voluntary, but strictly defined:

The anti-greenwashing rule, which applies to all FCA-authorised firms whether or not they use a label, came into force on 31 May 2024; the labels became available from 31 July 2024. The FCA has stressed that the labels are not a ranking: an Improvers fund is not a lesser Focus fund, it is a different strategy.

United States: the Names Rule

The US Securities and Exchange Commission amended its "Names Rule" in September 2023. Any fund whose name suggests a particular focus, including terms such as "ESG" or "sustainable", must adopt a policy to invest at least 80% of its assets accordingly. In March 2025 the SEC pushed back compliance by six months: to 11 June 2026 for fund groups with $1 billion or more in net assets, and to 11 December 2026 for smaller groups. Unlike the European rules, the SEC does not define what counts as "sustainable"; the fund defines its terms, and must then live by them.

What the rules do not tell you

• Thresholds measure the share of the portfolio, not the impact. A fund can meet 80% and still hold companies whose products you would not choose.
• Definitions differ by regime. The same global fund can be "sustainable" under one name in Europe and use another word in the US.
• Property counts too. The rules apply to real-estate funds as well as equity and bond funds. Anyone comparing what a fund's buildings are said to be worth with what similar homes or offices fetch on the open market can start from public property listings.

How to use this as an investor

Read the name, then read the policy. Check which threshold the fund claims to meet, which exclusions it applies, and how it reports progress. If a manager cannot answer those questions in two pages, the name is doing too much work. Our checklist for reading a responsible-investment policy goes further.

This article is general information, not investment advice. Regulations change; check the current text with the regulator or a qualified adviser before making decisions.

Sources

• ESMA, ESMA Guidelines establish harmonised criteria for use of ESG and sustainability terms in fund names (May 2024).
• Osborne Clarke, ESMA sets stricter guidelines for ESG and sustainability-related fund names.
• Sidley Austin, SFDR: five key takeaways from the European Commission's proposal (November 2025).
• Jones Day, UK FCA publishes Sustainability Disclosure Requirements and investment labels (March 2024).
• Katten, SEC extends compliance dates for the Names Rule amendments (March 2025).