The FCA’s Sustainability Disclosure Requirements (SDR) and Investment Labels

The IA is having ongoing in-depth conversations with the FCA around the key SDR implementation issues facing the industry. This note, reviewed by the FCA, has been produced following these conversations and specifically focuses on broad-based, multi-thematic sustainable strategies looking to apply the Sustainability Focus label. The note also touches on issues related to clarity of definition that may be relevant for other labels, including Sustainability Improvers.

This note, reviewed by the FCA, specifically focuses on strategies aiming to apply the Sustainability Impact label. The key issue addressed in this briefing note is demonstrating investor contribution for funds investing in listed equities. We also touch on impact funds investing in bonds and the relevance of Scope 1,2 and 3 emissions for all funds, regardless of label.

The briefing note focuses on strategies aiming to apply the Sustainability Improver label and provides details on the below aspects of the Improver Label with one point towards the end of the document on Sustainability Mixed Goals label. 

• Objectives;
• Short- and medium-term targets;
• Robust, evidenced based standards;
• Index trackers including Paris-aligned and Climate Transition Benchmark trackers;
• Assets moving from improver to focus and implications for funds with the Improver label; and
• Sustainability Mixed Goals label.

The briefing note outlines key considerations and guidance for non-labelled funds.

As firms have begun to implement the FCA’s rules, the IA has collected questions from firms and worked closely with Eversheds Sutherland to produce this Question-and-Answer-style guidance document (the “Guidance”). This document does not present an exhaustive list of all the questions raised since the Policy Statement was published and, as the picture evolves, for example with the FCA’s expansion of the regime to portfolio management and other products, we will keep the Guidance under review.

Following the FCA's statement in PS23/16 that it 'encourage(s) development of an industry-led template and industry collaboration on best practice' in relation to the SDR consumer-facing disclosure (CFD) requirements, the IA established a cross-trade working group to produce guidance and associated frameworks that firms can use when implementing the FCA's CFD rules.

This guidance - produced jointly by the IA, Eversheds Sutherland, UKSIF, AIC, the UK Depositary Association, PIMFA, TISA, and the ABI - has been developed to encourage more consistent disclosure between firms, improved comparability between products and better consumer understanding.

The IA and Eversheds Sutherland industry guidance on the timing considerations for SDR Implementation.

2024 brings many implementation deadlines for IA member firms: this guidance aims to illustrate the applicable timelines and to help firms plan ahead by outlining what needs to be prepared for an FCA application, if required, and when.

From March-April 2024, the IA undertook a survey of its members to build a comprehensive understanding of member experience and intentions regarding the implementation of the FCA’s SDR rules. Please follow the link to view the results of this survey.