Standard Life adds SDR funds to default strategy

Pensions provider Standard Life, part of the Phoenix Group, has announced that sustainability-labelled funds will now be included in its main default pension investment strategy.

The UK-based pensions and investment provider confirmed that all equity and fixed-income allocations within its default strategy will align with the Financial Conduct Authority's (FCA) new Sustainability Disclosure Requirements (SDR) and fund labelling rules. The shift is expected to take place in early 2025. 

Standard Life projects that over 75% of its sustainable multi-asset investments will carry a formal objective to support the transition to net zero by 2050, while meeting the FCA’s updated regulatory thresholds.

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The Phoenix Group highlighted that the move positions its in-house fund manager as one of the first adopters of the new ‘sustainability improvers’ label. This label will apply to six existing equity funds and two new fixed-income funds.

The ‘improvers’ classification is designed for products that invest in assets with potential for environmental, social and governance (ESG) improvements, though these may initially pose higher ESG risks.

Standard Life explained that the inclusion of these funds means its investments will predominantly target companies in transition, with the aim of managing climate risks while fostering sustainable progress.

Callum Stewart, head of investment proposition development at Standard Life, said: “We committed to a sustainable investment philosophy when transitioning 1.5m customers to sustainable strategies between 2020 and 2022, and now believe we are the first pension provider to embrace the new regulatory framework in advance of it becoming a requirement for pension funds.”

Sindhu Krishna, chief sustainable investment officer at Phoenix Group, added: “Alongside our customers, we know that the impacts of climate change need to be addressed to optimise returns. The new FCA labelling regime brings integrity to the market and aims to bring more transparency and information to customers. This will enable a better understanding in how funds are investing in companies with a credible path to reach net-zero by 2050.”