The FCA has given firms four more months time to comply with its new Sustainability Disclosure Requirements' regime and new investment label rules.

Firms were due to have met the requirements by December but will now have until 2 April 2025 to comply.

The Sustainability Disclosure Requirements (SDR) and investment labels regime (PS23/16) were published on 28 November 2023. 

They introduce rules designed to make marketing of SDR investments clearer and also add new investment ‘labels’ to help consumers assess which SDR investments are right for them.

The four new ESG labels (pictured above) are:

• Sustainability Improvers, which should aim to invest in assets that have the potential to improve environmental and/or social sustainability over time
• Sustainability Focus, which should aim to invest in assets that are environmentally and/or socially sustainable
• Sustainability Impact, which should aim to achieve a pre-defined, positive, measurable impact in relation to an environmental and/or social outcome
• Sustainability Mixed Goals, which should invest at least 70 per cent in line with a combination of the sustainability objectives for the other label

Global assets under management in environmental, social and governance (ESG)-oriented assets are expected to increase to £26trn by 2026, according to the FCA.

The FCA says it believes its package of measures, including the consumer-focused labels, will help protect investors from misleading or unclear descriptions of SDR investments and help them to make more informed decisions when investing.

The FCA’s anti-greenwashing rules took effect from 31 May. Since 31 July managers of UK-based investment funds have been able to use investment labels on their products.  

The FCA said that firms should now be taking all “reasonable steps” to ensure compliance with the ‘naming and marketing’ and disclosure rules, which come into force from 2 December but firms can have the flexibility to defer compliance to April if they need it.  

In a statement today the FCA said: “The SDR is a new regime that raises the bar. We have provided support to firms to help them meet these new higher standards.  

“In recent weeks, we have been encouraged to see good progress made by firms to comply with the rules, and a strong pipeline of fund applications from firms wishing to use the labels.  

“Through engagement with industry and their representative trade bodies, it has become clear it has taken longer than expected for some firms to make the required changes. In particular, some firms wishing to use an investment label, or which need to change the names of their products, require more time to meet the higher standards and prepare the disclosures needed for our approval.  

“Given the importance of getting SDR right for investors, we are seeking to take a pragmatic and outcomes-based approach to provide further support to those firms which may need additional time to operationalise any changes required.”