What is the fund actually claiming?

Begin with the precise sustainability objective as stated in the prospectus or pre-contractual disclosure. Vague wording undermines the entire framework. Key governance question: Can the objective be tested holding-by-holding, or does it remain largely aspirational?

Which label, and does it fit the process?

Sustainability Focus: Are assets sustainable today against a robust absolute standard? Sustainability Improvers: Is there credible, time-bound evidence of improvement and escalation if it stalls? Sustainability Impact: Is the positive impact pre-defined, measurable and linked to the manager’s actions? Sustainability Mixed Goals: Is the split across objectives clear, with transparent allocation and no double-counting?

What is the evidence standard for the 70% aligned bucket?

This remains the highest-value area of scrutiny. Selectors should press for the scoring framework, minimum thresholds, eligibility rules, data sources, treatment of missing data, controversies and ongoing review processes.

Does the portfolio actually align?

Review the 70% calculation, treatment of non-aligned holdings (including cash, derivatives and sovereigns), and ongoing monitoring. For Focus strategies, test why holdings qualify as sustainable today rather than on an improvement journey.

Are the KPIs decision-useful?

KPIs must connect directly to the objective and support ongoing assessment. Many disclosed metrics are technically compliant but add limited governance value if they are backward-looking, activity-based or insufficiently linked to outcomes.

For Mixed Goals: Is the split transparent?

Require clear allocation across components, classification methodology and controls against double-counting. Mixed Goals can obscure differences in evidence standards if not documented rigorously.

What are the trade-offs and negative outcomes?

Strong governance notes capture acknowledged conflicts, controversies, supply-chain/biodiversity issues, data limitations and potential unintended consequences. Selectors do not need perfection, but they need transparency.

What belongs in the governance file?

Document the following: - Formal objective (verbatim) and measurability - Label rationale and fit - 70% alignment methodology and monitoring - Evidence standard (including data quality/proxies) - Label-specific tests (Focus/Improvers/Impact/Mixed) - KPIs and their linkage to outcomes - Stewardship approach and evidence - Risks, trade-offs and limitations - Ongoing compliance triggers (annual firm review, label change/loss, alignment drift)

What would change the view?

Material triggers include label loss or change, alignment breaches, KPI deterioration, engagement failures, process drift, or evidence that sustainability outcomes no longer support the portfolio role. These are review points, not automatic exits.

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Infundly

SDR Fund Labels: Due Diligence Questions for Fund Selectors

Sheridan Admans
May 27
4 min read

UK SDR labels provide a clearer starting point for sustainable fund assessment, but they are not a substitute for allocator judgement. A label frames the claimed sustainability objective. Selectors must still test the formal objective, portfolio alignment, evidence standard, KPIs, stewardship, risks, trade-offs and monitoring triggers, and connect these to the fund’s intended portfolio role.

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