Foreword
PAS 7342:2025 was developed by BSI Standards Limited with input from industry participants and the UK Department for Energy Security and Net Zero. It addresses increasing regulatory and market scrutiny of sustainable investment funds and seeks to improve consistency, transparency and credibility, particularly in response to greenwashing risks.

Introduction

The report defines sustainable investing as integrating environmental and social considerations into investment decisions alongside financial objectives. It notes growing demand for sustainable funds, regulatory developments and challenges arising from inconsistent definitions and claims. PAS 7342 builds on earlier standards, including PAS 7341 and BS ISO 32210, and aligns with regimes such as the UK Sustainability Disclosure Requirements and EU SFDR. Its central aim is to prevent investors being misled while allowing flexibility in sustainable investment approaches.

Scope

PAS 7342 specifies requirements for the design, implementation, monitoring and communication of sustainability attributes of sustainable investment funds. It applies to single-asset, multi-asset and fund-of-fund structures. The specification covers fund naming, objectives, sustainability policies, governance, monitoring, evidence, disclosure and marketing. It is intended for fund managers, with relevance for advisers, intermediaries and investors.

Terms and definitions

The report establishes common definitions to support clarity and comparability. Key terms include sustainable investment, sustainability objectives, impact, outcomes, stewardship, exclusions, positive selection, greenwashing and de minimis limits. The definitions emphasise intentionality, alignment with published objectives and avoiding overstatement of sustainability characteristics or outcomes.

Sustainable investment fund naming

Funds promoted as sustainable must use names that are neutral or accurately reflect their sustainability policies and strategies. Names must not imply a narrower focus than exists in practice. Funds without sustainability objectives, or those limited to ESG risk mitigation, must not be presented as sustainable investment funds.

Objectives

Sustainable investment fund objectives must be publicly available, positive and outcome-oriented, combining sustainability intentions with financial aims. Objectives should clearly state the issues addressed, approaches used and whether exclusions, positive selection or stewardship are applied. The report stresses that objectives must be realistic, avoid claims of guaranteed outcomes or additionality unless demonstrable, and be reviewed at least annually with changes disclosed consistently.

Fund-level sustainability policies

Funds are required to document sustainability policies explaining the issues considered, approaches applied and criteria used. Policies must address environmental, social and governance issues, tolerance limits, treatment of supply chains and handling of assets with mixed sustainability attributes. Clear processes are required for reviewing and managing holdings that become misaligned with fund objectives.

Sustainable investment fund labelling

Where sustainability labels are used, funds must meet the relevant regime’s requirements and review alignment at least annually. Labels must be supported by clear disclosures, evidence and key performance indicators. Funds must cease using labels if requirements are no longer met and explain labelling criteria to clients.

Evidence

Fund managers must provide evidence supporting sustainability claims, including holdings information, KPIs, stewardship activity and data sources. The report requires disclosure of data limitations, proxy use and uncertainties. Evidence should be maintained, reviewed regularly and made accessible to clients and intermediaries.

Fund and fund manager governance and resources

Adequate governance structures, resources and expertise are required to deliver stated objectives. Senior management retains responsibility for oversight, monitoring, training and addressing breaches, which must be disclosed and resolved promptly.

Monitoring

Funds must monitor adherence to sustainability objectives, policies and disclosures on an ongoing basis. Sustainability considerations must not be overridden by financial performance. Performance and breaches must be reported at least annually.

Disclosure and marketing

Communications must be clear, fair and not misleading. Fund managers should transparently explain sustainability strategies, stewardship activities, use of labels, non-aligned assets and changes over time to support informed decision-making.