The Financial Conduct Authority (FCA), the UK’s regulatory body overseeing financial services firms and markets, has initiated a consultation on extending its Sustainability Disclosure Requirements (SDR) to portfolio managers. This proposal aims to empower investors to evaluate the sustainability attributes of investment products while mitigating the risks of greenwashing, a deceptive practice that exaggerates environmental or social claims.
The move follows the FCA’s introduction of SDR for asset managers in November 2023, which included regulations on product naming, marketing, and an anti-greenwashing provision. These regulations were primarily designed for retail investors. However, the new proposal seeks to broaden the scope to encompass firms managing investments for consumers, particularly targeting wealth management services for individuals and model portfolios for retail investors.
Under the proposed extension, portfolio managers would be subject to naming and marketing rules effective from December 2, 2024, coinciding with asset managers’ compliance timeline. Additionally, they would have the option to use sustainability labels introduced by the FCA to help investors distinguish between different sustainability objectives and investment approaches. Larger firms, with assets under management exceeding £50 billion, would need to provide product-level disclosures under the SDR from December 2025, followed by firms with AUM exceeding £5 billion from December 2026.
Click here to access the proposal to extend the SDR to portfolio managers.
Accompanying the proposal, the FCA has released guidance to assist firms in navigating the new regulations. This finalized guidance addresses stakeholder feedback, clarifies rule scope, provides examples of good practice, and confirms the timeline for the implementation of the anti-greenwashing rule by the end of May 2024.
Click here to access the finalized guidance.
Overall, the FCA’s proposal represents a significant step toward enhancing transparency and accountability in sustainable investing practices within the financial services industry.
Sacha Sadan, FCA’s Director of Environmental, Social and Governance, said:
Confirming the new anti-greenwashing guidance and our proposals to extend the Sustainability Disclosure Requirements and investment labels regime are important milestones that maintain the UK’s place at the forefront of sustainable investment. Our good and poor practice anti-greenwashing examples will help firms market their products in the right way.
