SDR will bring more “trust and integrity” to financial services

9th May, 2024

The Financial Conduct Authority (FCA) has predicted its Sustainability Disclosure Requirements (SDR) labels will improve consumers’ perception of the financial services industry.

Sacha Sadan, director of ESG at the FCA, said the implementation of the new labels from July would help bring “trust and integrity” back to the financial services sector, Investment Week reports.

The FCA revealed its final SDR and investment label regime in November, outlining its new labelling categories: sustainability impact, sustainability focus, sustainability improvers, and sustainability mixed goals.

Under the requirements, firms are required to disclose any assets held for reasons other than to pursue the sustainability objective of a product.

Firms must also have an escalation plan to be enacted if the assets do not demonstrate sufficient performance against the sustainability objective.

Speaking at Amundi's ‘Responsible Investment Live' conference, Sadan noted that while increasing numbers of consumers want their investments to have a positive impact on the environment, many don’t understand the terminology used to describe sustainable products.

As a result, the SDR labels include the ‘sustainability improvers’ label, which replaced the ‘course to transition’ label in the original draft of the proposals, as it was found to be too confusing.

While not all financial products require a label, Sadan said the labels would help investors identify sustainable products to make an informed decision between sustainable and non-sustainable funds.

Sadan also spoke about the European Commission’s recent updates to its Sustainable Financial Disclosure Regulation (SFDR) and implementation challenges.

He said: “We are working hard and sharing our consumer data [with the EU], because we would love [the SDR and SFDR] to converge.”

Minerva's blog focuses on the latest developments in ESG investing and stewardship. Minerva is a global provider of sustainable stewardship solutions with over 25 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data, enabling them to navigate the intricate landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.