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Sustainability Disclosure Requirements (SDR): The Financial Conduct Authority announce new proposals

31st Oct 2022
The Financial Conduct Authority (FCA) has announced several new measures to tackle greenwashing and improve transparency for sustainable investment products.

Sustainability Disclosure Requirements (SDR)

A key milestone within the UK Government’s Sustainable Investment Roadmap, attempting to increase transparency and market confidence, SDR proposes three investment labels to categorise sustainable investment products:

  • sustainable focus
  • sustainable improvers
  • sustainable impact

Simon Gordon, Senior Director of Fund & Corporate Services, at JTC commented:

“In general, this consultation by the FCA is being welcomed by the market and the investment funds industry. With climate change, the rising cost of living, and the multiple global political challenges we face it is becoming clear that the financial system, the environment, and broader society are all inter-dependent.”

“The Funds industry is an extremely innovative sector and increased transparency can only be good for all stakeholders.  It is pleasing to see the pragmatic approach being taken by the FCA whereby they are asking the Funds industry to suggest a standard format to enable people to really understand ESG credentials of investment products.”

Victoria Gillespie, Head of ESG Services, at JTC, added:

“For some, this may feel like yet another requirement. While the FCA have taken care to emphasise the consultation does consider “coherence with other frameworks – notably the Sustainable Financial Disclosure Regulation (SFDR) in the European Union (EU) and proposals by the Securities and Exchange Commission (SEC) in the United States, it has also taken steps to recognise differences.”

Sacha Sadan, the FCA’s Director of Environmental, Social and Governance, admitted that it is possible that funds which fall into the Article 8 category in SFDR may not qualify as meeting ‘sustainable’ standards in the UK SDR labelling regime. The key comparisons drawn by the FCA:

1) SDR is a ‘labelling regime’ not a disclosure regime

2) SDR is not adopting some aspects of SFDR such as mandated templates, the “Do no significant harm” principle (DNSH) or taxonomy alignment as they see these as being “too restrictive at this stage”

3) The labels proposed will not be hierarchical unlike in SFDR, which the FCA sees as mechanism to prevent the “marketing people” from pursuing the ‘more sustainable’ labels in the interest of increasing sales.

Simon added:

“The SDR labels and the general anti-greenwashing rule should add real comfort for investors. The challenge for the FCA will be to make sure there is universal adoption of any format by the industry.”

The FCA are proposing that the labelling, naming and marketing disclosures will not come into effect until 30 June 2024 at the earliest, which will allow funds and asset managers time to perform internal assessments of current fund structures and portfolios. The consultation remains open until 25 January 2023, with all financial market participants being asked for comments before publishing rules mid-2023.


JTC’s ESG Services team regularly monitor reporting guidelines for changes. Their role is to help support and guide clients through a sometimes confusing and challenging world of evolving requirements. To find out more about the FCA changes or listing requirements contact Simon Gordon directly. For further information on our ESG Services, please contact Victoria Gillespie and her team at [email protected] or on the dedicated webpage here.

Earlier this year, JTC launched its virtual Chief Sustainability Officer (vCSO) solution to enable organisations and individuals to benefit from the experience and expertise of our ESG Services team in relation to ESG Strategy, ESG Training and Carbon Support. Find out more here.