Executive Summary
The UK Financial Conduct Authority (FCA) published new rules – the Sustainability Disclosure Requirements and investment labels regime – in November 2023 to help investors navigate the investment product landscape and to protect them from greenwashing.
The regulations cover product labels, naming and marketing requirements, disclosures, rules for distributors and a broad anti-greenwashing rule for all authorised firms. Product labels for sustainable products are optional and are expressly not a disclosure regime. The labels are designed to cover different investment profiles and include the following:
- Sustainability Focus
- Sustainability Improver
- Sustainability Impact
- Sustainability Mixed Goals
The FCA has also published non-handbook guidance to accompany the anti-greenwashing rule. The guidance has applied since 31 May 2024 and at the same time as the anti-greenwashing rule.
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Adam Jacobs-Dean
Managing Director, Global Head of Markets, Governance and Innovation
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Thomas Sharpe
Associate Director, Markets, Governance and Innovation
Practical Implications
In-scope firms need to review their current products that are marketed as “sustainable” to ensure they meet the criteria of the investment label and naming and marketing rules. This may involve making changes to products in order to ensure that they qualify. Sustainable products will also need a sustainability objective. Firms should consider whether they have the processes in place to ensure compliance.
Timeline
AIMA has categorized this regulation as Medium Priority/Medium Impact and it is therefore represented in mid-dark blue in the AIMA Regulatory Horizon Scan gantt chart.
Timeline and summary of past changes
Authority |
Rule Change |
Effective date |
Categorisation |
Resources |
FCA |
Anti-greenwashing requirement |
31 May 2024 |
Medium Priority Medium Impact |
|
FCA |
For firms using product labels: Sustainable product labels, naming and marketing rules, consumer-facing and pre-contractual disclosure requirements |
31 July 2024 |
Medium Priority Medium Impact |
|
FCA |
For distributors: product label and consumer-facing disclosure requirements |
31 July 2024 |
Medium Priority Medium Impact |
|
FCA |
For distributors: notice on overseas funds |
2 December 2024 |
Medium Priority Medium Impact |
|
FCA |
For firms not using product labels but using sustainability terms in names and marketing: naming and marketing rules, consumer-facing and pre-contractual disclosure requirements |
2 December 2024 |
Medium Priority Medium Impact |
|
FCA |
For firms not using product labels but using sustainability terms in names and marketing: first ongoing sustainability performance related product-level disclosures |
12 months after first use |
Medium Priority Medium Impact |
Timeline and summary of upcoming changes
Authority |
Rule Change |
Effective date |
Categorisation |
Resources |
FCA |
For firms using product labels: first ongoing sustainability performance-related product-level disclosures |
31 July 2025 |
Medium Priority Medium Impact |
|
FCA |
For firms using product labels: first on-demand ongoing sustainability performance-related product-level disclosures |
2 December 2025 |
Medium Priority Medium Impact |
|
FCA |
For firms with more than £50 billion AUM: first entity-level disclosures |
2 December 2025
|
Medium Priority Medium Impact |
|
FCA |
For firms with between £5 billion and £50 billion AUM: first entity-level disclosures |
2 December 2026 |
Medium Priority Medium Impact |
Changes under consideration
The FCA is currently consulting on extending the SDR and Investment Labels regime to portfolio managers. The consultation closed on 14 June 2024. The consultation proposes extending broadly the same elements of the existing regulation – product labels, naming and marketing rules, disclosures and distributor rules – to portfolio managers. Portfolio management services provided to an overseas client or to a client that is an Alternative Investment Fund Manager are expressly out of scope of the proposed extension.
Timeline and summary of changes under consideration
FCA |
Extending the SDR to portfolio management: labelling, naming and marketing, associated consumer-facing and pre-contractual disclosures |
Policy statement and information about implementation expected Q2 2025 |
Medium Priority Medium Impact |
|
FCA |
Extending the SDR to portfolio management: first ongoing sustainability performance related product-level disclosures for firms not using product labels but using sustainability terms in names and marketing |
Policy statement and information about implementation expected Q2 2025 |
Medium Priority Medium Impact |
|
FCA |
Extending the SDR to portfolio management: first ongoing sustainability performance-related product-level disclosures for firms using product labels |
Policy statement and information about implementation expected Q2 2025 |
Medium Priority Medium Impact |
|
FCA |
Extending the SDR to portfolio management: first on-demand ongoing sustainability performance-related product-level disclosures for firms using product labels |
Policy statement and information about implementation expected Q2 2025 |
Medium Priority Medium Impact |
|
FCA |
Extending the SDR to portfolio management: first entity-level disclosures for firms with more than £50 billion AUM |
Policy statement and information about implementation expected Q2 2025
|
Medium Priority Medium Impact |
|
FCA |
Extending the SDR to portfolio management: first entity-level disclosures for firms with between £5 billion and £50 billion AUM |
Policy statement and information about implementation expected Q2 2025 |
Medium Priority Medium Impact |
Upcoming consultations
The previous Government had separately stated that it would publish a consultation on the application of SDR and the Investment Labels regime to Overseas Fund Regime funds in Q3 2024. Following the change to a new Government, this did not take place.
Timeline and summary of upcoming consultations
HMT |
Government consultation on the application of SDR and investment labels to Overseas Funds Regime funds |
Had been expected Q3 2024 but not published. |
Medium Priority Medium Impact |
|
FCA |
FCA consultation on rules and guidance related to application of SDR to Overseas Funds Regime funds |
2025 publication had been expected following Government consultation. |
Medium Priority Medium Impact |