The UK’s Financial Conduct Authority (FCA) has decided to pause its plans to extend the Sustainability Disclosure Requirements (SDR) to portfolio managers, despite strong support from industry stakeholders. Initially set to be rolled out as part of a broader sustainable investment framework, the move is now delayed, with the regulator citing operational concerns and the need for further clarity on implementation.
“We want to take time to carefully consider the challenges and ensure that portfolio managers are positioned to implement the regime effectively,” the FCA stated in its update.
The extension, first proposed in April 2024, aimed to bring wealth management services and retail model portfoliosunder the SDR framework, which already includes anti-greenwashing rules and sustainability-related fund labelling for asset managers. The SDR was initially introduced in November 2023 to promote transparency and prevent misleading sustainability claims in the investment sector.
However, after gathering feedback from industry players, the FCA acknowledged the need for more time to address the complexities and operational challenges of applying the SDR to diverse portfolio types and structures. Compliance concerns were a central issue, with industry players requesting additional time to align with the requirements and ensure proper implementation across different types of portfolios.
The FCA’s decision reflects concerns raised during consultations, including:
- Timeframe: More time needed to meet compliance deadlines and effectively prepare for the new rules.
- Naming Conventions: The need for clearer guidance on how sustainable investment labels would apply to various portfolio structures and client bases.
- Existing Obligations: Clarification needed on how the new rules interact with current sustainability disclosure requirements.
- Practical Guidance: Industry players sought more detailed instructions on how the labelling system would work in real-world portfolio management.
Despite this delay, the FCA reaffirmed its commitment to extending the SDR to portfolio management in the future, underlining its importance for improving consumer outcomes in sustainable investing. The regulator’s cautious approach aims to ensure readiness across the sector before finalizing the new rules, signaling a desire for regulatory coherenceand avoiding potential confusion or gaps in compliance.
Industry stakeholders are now awaiting further guidance and an updated timeline for the SDR expansion, as the FCA works to balance ambition with practical implementation considerations.
