FCA delays SDR for second time 

July 21st, 2023

The Financial Conduct Authority (FCA) has delayed publishing its final Sustainability Disclosure Requirements (SDR) until Q4 2023.

In a regulatory update, Nikhil Rathi, CEO of the FCA, and Sam Woods, deputy governor, prudential regulation at the Bank of England, announced that the delay followed its consultation period, during which time it received a “range” of comments.

This is the second time the regulator has pushed back the introduction of SDR, which was originally set to be published in the first half of 2023 but was delayed in order to cope with the influx of feedback.

The requirements received 240 written responses during the consultation stage, which was significantly higher than expected.

The FCA designed SDR to create transparency and become the UK equivalent of the EU Sustainable Finance Disclosure Regulation (SFDR).

Among the proposals are rules aimed at eradicating greenwashing and promoting the UK as the world leader for sustainable investing.

Under the SDR, asset managers and investment advisers will be required to provide mandatory ESG disclosures requirements to improve the transparency of sustainable funds and prevent greenwashing. They will also have to disclose how they address sustainability risks and principal adverse impacts.

Another proposal, which has received criticism from the Treasury Committee’s Financial Service Regulation Sub-Committee, is for the introduction of fund labels that curtail exaggerated or misleading sustainability-related claims of investment products.

The sub-committee said the rules would exclude around 70% of all retail investments and result in higher costs for both the industry and consumers. It accused the FCA of failing to assess the potential costs of this measure to investors.

However, SDR has received praise from other parts of the financial services industry. In January, UKSIF commended the rules for creating a “higher bar” for funds seeking to make sustainability claims, compared to the EU’s SFDR.