What the FCA Sustainability Disclosure Requirements (SDR) delay means for financial firms
The Financial Conduct Authority (FCA) has thrown a curveball by delaying SDR for portfolio management. Having previously stated they would issue a policy statement on SDR for portfolio management during Q2 2025, the FCA has now confirmed this will be delayed, without giving any updated timescale. If you’ve been gearing up for the original deadline, you might be wondering what this means for your firm - or for the DFMs (Discretionary Fund Manager) you rely on.
What is SDR – and why does it matter?
The FCA’s Sustainability Disclosure Requirements (SDR) are designed to bring transparency and standardisation to how investment firms disclose sustainability-related information. It’s a big deal because it’s all about ensuring consistency, reducing greenwashing risks, and helping investors make informed decisions.
SDR timeline – key dates so far
- 31 May 2024 – Anti-greenwashing rules came into effect, requiring all sustainability claims to be fair, clear, and verifiable.
- 31 July 2024 – UK-domiciled funds became eligible to start using SDR labels, with accompanying disclosures.
- 2 Dec 2024 – New naming and marketing rules took effect for UK-domiciled funds.
- 2 Dec 2025 – Asset management firms with over £50 billion AUM will need to comply with product-level and entity-level disclosure rules.
- 2 Dec 2026 – The same disclosure rules will apply to asset management firms with over £5 billion AUM.
What financial firms need to know
One of the most immediate and critical impacts of SDR is the anti-greenwashing rules, which came into force on 31 May 2024. These rules require FCA-authorised firms to make sure that their sustainability-related claims are fair, clear, and not misleading, and that they’re consistent with the sustainability characteristics of the product or service they provide.
This new regulation has already sparked significant changes within the industry. Some firms, such as Hawksmoor, have even temporarily suspended their sustainable portfolios while they reassess compliance with these rules. The delay in portfolio-level SDR regulations doesn’t exempt firms from these stringent anti-greenwashing requirements, so all firms still need to act.
Failing to comply with anti-greenwashing measures can lead to reputational damage, regulatory scrutiny, and potential penalties. It’s vital that firms proactively review all ESG claims for assurance that they’re accurate, verifiable, and aligned with genuine sustainability objectives.
The delay in the naming and marketing rules being applied to portfolio management is a double-edged sword. On one hand, it gives portfolio managers more time to prepare for the new regulations. On the other, it prolongs the period of regulatory uncertainty, which can make planning difficult. It also delays portfolios being able to adopt sustainability fund labels, which should help make it easier for advisers and their clients to compare the sustainability credentials.
Julia Dreblow, a member of our Ethical Oversight Committee, member of the FCA’s Disclosure and Labels Advisory Group and Vice Chair of the FCA's Advisers’ Sustainability Group, shares her perspective:
I understand why the FCA has paused extending SDR labels to portfolios. SDR has done much good in tackling greenwashing, but fund labelling isn’t going entirely to plan. Many relevant funds remain out of scope or unhappy with the implementation process. Since portfolio labelling was always meant to follow naturally from fund labelling, it makes no sense to extend the regime yet.
What firms should do next
- Don’t put your compliance prep on hold – the delay doesn’t mean SDR is going away. Firms should continue refining their sustainability reporting strategies.
- Make sure you’re ESG compliant - anti-greenwash rules already apply across the industry since May 2024, so all firms need to ensure that any ESG claims are correct, clear, complete and capable of being substantiated.
- Stay updated on FCA announcements – keep an eye out for any further guidance or timeline adjustments from the regulator.
- Review current ESG strategies – use this time to align sustainability goals with future SDR requirements, including assessing whether funds will use a label, defining sustainability objectives, and identifying key KPIs for reporting.
- Engage with stakeholders – ensure investors, clients, and internal teams understand how SDR will impact decision-making once it comes into effect.
At Parmenion, we’re working closely with our underlying fund managers to understand their approach to SDR - whether their funds will adopt a label, what their sustainability objectives are, and which KPIs they will report on. This ongoing engagement ensures that our ESG portfolios remain aligned with the evolving regulatory landscape.
Need help navigating SDR? Get in touch to discuss how we can support your firm in staying ahead of the regulatory curve.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity.
Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
