Schroder's revamps Energy Transition Fund prior to ESMA deadline
In a move to align with evolving regulatory expectations, UK-based investment manager Schroders has announced the rebranding of its £167m Global Energy Transition Fund to Schroder Global Alternative Energy Fund, effective from 26 February. The rebranding is in compliance with the new EU regulations on sustainable fund labelling.
The new guidelines, introduced by the European Securities and Markets Authority (ESMA), aim to tighten minimum standards for how funds use ESG or sustainability-related terms in their names. These rules are part of broader reforms linked to the Sustainable Finance Disclosure Regulation (SFDR) and related EU sustainability frameworks.
Schroders is not legally obligated to change the fund name in the UK, but it is rebranding to communicate the fund's focus on solution assets rather than transition stocks. The Schroders Global Energy Transition Fund has been particularly popular among European investors and has outperformed its benchmark, the MSCI Global Alternative Energy Index, despite a drop of more than 36% since 2022.
The fund focuses on investments in industrials, utilities, and information technology. However, the new guidelines define transition strategies as assets that will become sustainable over time and require funds to dedicate at least 80% of their portfolio to assets that meet the criteria for transition assets. As such, Schroders may need to divest from some assets or consider rebranding again to fully meet the new minimum standards.
The new ESMA guidelines will come into force in May 2025. Fund houses that fail to meet these guidelines could be fined and risk reputational damage. Clarity AI's research, based on 3,200 funds labelled ESG or sustainable, distributed in Europe, shows that more than half of these funds contain breaches of the new ESMA guidelines.
The rebranding of the Schroders Global Energy Transition Fund is part of a broader trend towards improving comparability and credibility of sustainable funds in the EU market. The move may impact marketing, investor communications, and product structuring of funds. As the 2025 EU sustainable fund labelling guidelines are increasingly rigorous and data-driven, Schroders will need to enhance ESG disclosures and potentially adjust fund labelling to stay aligned with evolving regulatory expectations.
Sources: 1. ESMA Publishes Guidelines on Sustainable Finance Disclosures Under SFDR 2. Schroders to Rebrand Global Energy Transition Fund
Schroders' decision to rebrand its Global Energy Transition Fund follows the new EU regulations on sustainable fund labelling, as part of the broader Sustainable Finance Disclosure Regulation (SFDR) and related EU sustainability frameworks. With the new guidelines set to tighten minimum standards for funds using ESG or sustainability-related terms, Schroders is adapting its fund name to communicate its focus on solution assets, potentially impacting marketing, investor communications, and product structuring of its funds.
