FCA delays final rules on sustainability disclosure requirements (SDR) and investment labels

The FCA has announced that it is delaying the publication of its Policy Statement on SDR and investment labels until Q3 this year. Following the consultation paper published in October last year, which we considered here, the final rules were originally expected to be published by the end of H1 2023.

This comes as no surprise as there has been a significant level of engagement with the FCA on the proposals, as well as responses to the consultation, which the regulator will now have more time to consider and address in the final rules. The FCA will continue to engage with stakeholders throughout this process.

The proposed effective dates for the application of the new requirements will be adjusted accordingly.

Whilst the FCA notes that the regime should first and foremost protect consumers, it seems to recognise the practical challenges that many firms have raised.

As a result, changes can be expected in a number of areas, including with respect to the naming and marketing rules and the criteria for the application of investment labels (including with respect to multi-asset and blended strategies). The FCA will also clarify that it will not require independent verification of product categorisations in order to quality for a label.

In addition, the FCA appears to recognise that products that may not qualify for a specific sustainability label may nevertheless have some sustainability-related characteristics that may be important to consumers, and that there should also be a place for such products within the overall regime.

With respect to international coherence, the FCA notes that it will continue to consider how to further support compatibility, while emphasising the need robust UK standards. Some divergence between different regimes can therefore still be expected.

The FCA notes that a strengthened regulatory framework increases both opportunities and competition in the market, with key importance expected to be placed on ensuring products better suit consumers’ needs and preferences.