SDR Update – Anti-Greenwashing rule comes into force

Today the Financial Conduct Authority (FCA) comes into force. The UK’s financial watchdog first published a consultation on the scheme in October 2022. Outcomes were  published in November 2023 following delays.

The rules are comprehensive and apply to all communications from FCA-regulated firms when making sustainability-related claims in the UK to clients about products and services, or when making a financial promotion to (??) any person in the UK. All such claims must be:

  • Correct and capable of being substantiated
  • Clear and presented in a way that can be understood
  • Complete, considering full life cycle of the product or service
  • Fair and meaningful when compared with other products or services

The rules are part of a broader package of , which fall under the Sustainability Disclosure Requirement (SDR), a new set of regulations aimed at protecting and informing consumers when investing in products that make green claims. These new regulation can be seen as the UK’s response to the EU’s SFDR. As part of the UK’s new scheme, fund managers can choose from the following labels:

  • Sustainability Impact
  • Sustainability Focus
  • Sustainability Improver
  • Sustainability Mixed Goals

Earlier in May the FCA published an implementation update on the SDR, in which they confirmed the following phased implementation timeline:

  • 31st July 2024 –labels can begin to be used
  • 2nd December 2024 – naming and marketing rules come into effect
  • 2nd December 2025 – Ongoing product-level disclosures, and entity-level disclosures for firms with AUM > £50bn
  • 2nd December 2026 – Entity-level disclosure rules extended to firms with AUM > £5bn

While the labelling regime is currently limited to UK domiciled funds marketed to retail investors, several planned consultations could potentially extend the scheme to include overseas funds and portfolio managers, thereby increasing its market impact.

In the interim, UK real estate investors should consider selecting appropriate labels for their funds and organizing the necessary paperwork to disclose voluntarily or prepare for the scheme’s broader application. The top priority, however, must be to ensure that all sustainability-related claims in marketing and communications comply with the April anti-greenwashing guidance.

The May implementation update also included new details on the implementation of the UK’s Sustainability Disclosure Standards.


Global sustainability disclosure standards were released by the International Sustainability Standards Board (ISSB) last summer. While it is optional for UK businesses to adopt these standards, those that do must disclose material information about sustainability-related risks and opportunities that could reasonably impact their prospects.

In August 2023, the UK government announced its plan to implement UK sustainability disclosure requirements based on ISSB standards. The government stated it would only divert from the global baseline if “absolutely necessary” for UK-specific matters. Initially, the new UK standards were expected to be endorsed by July 2024. However, the government has now confirmed that it aims to issue the new ISSB-aligned UK sustainability reporting standards in the first quarter of 2025.


Elsewhere in the May update, the FCA announced its plans to extend the SDR regime to portfolio managers within the UK financial services sector. A consultation has opened which closes on the 14th June 2024.

The consultation proposes an introduction date of 2nd December 2024 as the date at which portfolio managers could begin to use labels, as well as when the naming and marketing rules would come into effect. It seems very likely that these proposals will be adopted, meaning portfolio managers of retail-facing offering should begin preparing for compliance and considering appropriate labelling now.

In January, the Government announced its intention to consult on widening the scope of the SDR to include funds under the Overseas Funds Regime, i.e. funds marketing into the UK. This is expected to be published in Q3 2024.

In the May implementation update, the Government also committed to consulting on how the UK’s largest companies can most effectively disclose their transition plans, by integrating the TPT disclosure framework with the new UK-endorsed ISSB standards, the UK SDS.

Finally, the FCA has stopped short of incorporating the TNFD recommendations into its sustainability standards, but rather now encourages institutions to engage with them and to consider their recommendations.

Market Reaction

The SDR has generally been well-received by the market, with the FCA having the benefit of the ‘second mover’ advantage over the EU, allowing them to learn from the mistakes and impracticalities of the SFDR. In contrast the FCA have worked to implement a strict hierarchical labelling system designed to simplify investment decisions for retail investors.

“Sustainability Focus” appears to be the most popular label choice, with the other four labels being roughly equally chosen behind it. The coming months will reveal much about the practicality of the new system and its ultimate usefulness to consumers.

Get in touch with Longevity Partners’ Policy and Regulation team for more information on how we can support you through your SDR compliance journey.







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