The FCA has announced it will not move forward, for now, with plans to extend its Sustainability Disclosure Requirements (SDR) and sustainable investment labelling rules to portfolio managers, citing industry feedback that called for more time and clarity.
According to ESG Today, this proposal, introduced in April 2024, aimed to expand upon the SDR regime launched for asset managers in November 2023. The initial rules included anti-greenwashing guidance, marketing and naming rules for funds with sustainability features, and a product labelling framework.
Although originally targeted at retail investment products, the FCA sought to broaden the scope to cover firms managing investment portfolios for consumers, particularly those offering wealth management services and model portfolios.
However, following a consultation process, the FCA has now officially paused the initiative. The regulator had initially delayed publishing a final Policy Statement to Q2 2025. In its latest update, it confirmed that it has “decided that it is not the right time to finalise rules on extending SDR to portfolio management.”
The FCA said feedback showed strong support for the principles of the SDR, especially its goal of enhancing consumer transparency and trust in sustainability claims. Nevertheless, respondents raised concerns over timing, implementation challenges, and technical ambiguities. Specific issues included how naming rules would apply across diverse portfolios and client types, how new labels would interact with existing sustainability disclosures, and what labelling criteria would mean in practice for portfolio managers.
The FCA said, “Overall, there is broad support for extending SDR to portfolio management, with most respondents agreeing this is an important step toward improving consumer outcomes. However, we want to take time to carefully consider the challenges and ensure that portfolio managers are positioned to implement the regime effectively before introducing requirements.”
This decision highlights the regulator’s cautious approach to implementing sustainable finance regulations and reflects the complexity involved in aligning the financial services industry with evolving ESG standards.
The UK FCA recently revealed it was preparing to roll out a new live testing service for AI, designed to help financial firms deploy AI tools in a responsible and secure manner.
As part of its AI Lab initiative, this proposed service will offer regulatory support and a collaborative testing environment, ensuring firms can validate their AI solutions before rolling them out to the market.
Scheduled for launch in September 2025, the service is expected to run for a period of 12 to 18 months. It will enable firms developing consumer- or market-facing AI models to work closely with the FCA as they test their technologies in real-time. The initiative is aimed at closing a critical testing gap that has been slowing the adoption of AI across the UK financial sector.
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