Schroders Renames Energy Transition Fund in Compliance with ESMA Deadline
Schroders Rebrands Global Energy Transition Fund in Compliance with New EU Guidelines
The financial landscape is undergoing significant changes, with fund houses across Europe, including Schroders, facing the challenge of rebranding to comply with the new ESMA guidelines on sustainable and ESG fund labelling. These guidelines, introduced last year, establish specific criteria for transition assets to ensure that they contribute credibly to the transition towards sustainability.
The new EU guidelines define transition strategies as assets that will become sustainable over time. Under these guidelines, transition assets must:
- Align with climate transition pathways, supporting the shift to a low-carbon economy and meeting EU Climate Law targets or sector-specific decarbonization trajectories.
- Provide detailed, standardized disclosures on emissions, climate impact, and principal adverse impacts, following the updated Sustainability Finance Disclosure Regulation (SFDR) rules.
- Meet minimum sustainable investment thresholds, often requiring a significant portion of portfolio holdings to be taxonomy-aligned or demonstrate credible transition plans.
- Avoid misleading claims by requiring evidence-backed environmental or social characteristics and standardization in fund naming conventions as per ESMA and SFDR updates.
- Satisfy specific taxonomy criteria or technical screening criteria designed to ensure genuine environmental benefits.
These transition criteria form part of the broader EU effort to replace the familiar Article 6, 8, and 9 SFDR categories with a clearer, more coherent, and enforceable labeling system in coming regulatory updates.
Schroders' Global Energy Transition Fund, managed by Alex Monk, Felix Odey, and Mark Lacey, focuses on investments in industrials, utilities, and information technology. The fund has been particularly popular among European investors. However, the European share class of the Schroders fund has dropped by more than 36% since 2022. Despite this drop, the Schroders fund is still outperforming its benchmark, the MSCI Global Alternative Energy Index, which is down 53.2%.
In light of these new guidelines, Schroders is rebranding its Global Energy Transition Fund to Schroder Global Alternative Energy Fund on February 26. This rebranding is in compliance with EU regulations on sustainable fund labelling. The fund's emphasis is on investing in solution assets rather than transition stocks.
The new ESMA guidelines will come into force in May 2025. Fund houses that fail to meet these new guidelines could face fines and reputational damage. According to recent research by Clarity AI, more than half of the 3,200 ESG or sustainable funds in Europe may need to divest from some assets or consider rebranding to comply with the new guidelines.
The new guidelines are part of ongoing regulatory evolution aimed at improving clarity, comparability, and investor protection in sustainable finance. Funds must dedicate at least 80% of their portfolio to assets that meet the criteria for transition assets according to the new guidelines. The guidelines also emphasize avoiding greenwashing through standardized naming and reporting provisions.
These changes reflect the EU's commitment to promoting sustainable investing and ensuring that funds live up to their green claims. As the landscape continues to evolve, fund houses will need to adapt to these new guidelines to maintain their reputation and continue attracting investors.
[1] European Commission’s 2025 Call for Evidence and ESAs’ technical updates [3] ESMA guidelines and SFDR delegated regulations
- In alignment with the new EU guidelines, Schroders is rebranding its Global Energy Transition Fund, focusing on investments in industrials, utilities, and technology, to Schroder Global Alternative Energy Fund on February 26, signifying a shift from transition assets to solution assets.
- Fund houses, including Schroders, faced with the challenges of the new ESMA guidelines on sustainable and ESG fund labelling, must dedicate at least 80% of their portfolio to assets that meet the criteria for transition assets, with an emphasis on avoiding greenwashing through standardized naming and reporting provisions to maintain their reputation and continue attracting investors, starting in May 2025.
