FCA delays SDR implementation for portfolio managers

The Financial Conduct Authority (FCA) has announced it will no longer publish a policy statement in Q2 2025 on the way it intends to extend its Sustainability Disclosure Requirements (SDR) to the portfolio management sector, with asset managers still grappling to comply.

“We are aware it is taking longer than expected for some asset managers to comply with the SDR and labelling regime and of the potential impact this might have on portfolio managers. This has been highlighted to us in the consultation feedback and industry engagement,” the FCA said.

The update continued: “We want to ensure an extension of SDR to portfolio management delivers good outcomes for consumers, is practical for firms and supports growth of the sector.” Therefore, the FCA “no longer intend[s] to publish a policy statement in Q2 2025.

“We will continue to reflect on the feedback and provide further information in due course.” 

Last year, the FCA announced its intention to help consumers, including those who use portfolio management services, to navigate the sustainable investment market by extending the SDR and labelling package to portfolio management. This would mean applying a similar approach to labelling for portfolio managers as for fund managers in order “to have a consistent approach and create a level playing field”.

Also read: What’s in a label? The double-edged sword of SDR labelling

However, the journey toward implementation “has been fraught with challenges for fund managers”, with industry consultation repeatedly highlighting concerns about the assumptions underpinning the FCA’s approach, as well as the practical realities of compliance, according to Jake Moeller, Square Mile’s associate director – responsible investing.

‘SDR for funds needs time to settle in’

Last year, the Personal Investment Management and Financial Advice Association (PIMFA) requested a one-year delay to the implementation of SDR for portfolio management, stating that, while members “are supportive of the intended purpose and spirit of the proposals”, they had concerns about some of the details and practicalities of the proposals.

According to Maja Erceg, senior policy adviser, EU and government affairs, at PIMFA, those concerns are still present.

She said: “We welcome the FCA’s decision to delay publication of the policy statement. PIMFA has argued strongly the FCA should first allow for the implementation of SDR rules for funds before extending the regime to portfolio management. Considering the difficulties that asset managers faced when complying with the regulation and the consequent slow take up of labels, the FCA’s decision to delay publishing final rules for SDR for portfolio management is welcome.

“It will allow much-needed time for the SDR regime for funds to settle and to build the investment universe of labelled funds from which to construct sustainable portfolios.”