FCA Pauses SDR Extension to Portfolio Managers Due to Industry Concerns

The UK's Financial Conduct Authority (FCA) launched a consultation in April 2024 to explore whether the existing Sustainability Disclosure Requirements (SDR) framework – introduced for asset managers in November 2023 – should be extended to firms offering portfolio management services, particularly wealth management services for individuals and model portfolios for retail investors. On 30 April 2025, the FCA announced that its plans to issue a Policy Statement extending this framework had been put on hold following a review of the responses to that consultation.

The original SDR framework introduced an anti-greenwashing rule, fund naming and marketing requirements, and a new sustainable investment labelling system. These changes were aimed at improving transparency and trust in sustainability claims made to retail investors, by ensuring investors would be able to better rely on labelling and disclosures in navigating the market. Firms offering services to professional clients or institutional investors would be able to opt in to this regime and  the anti-greenwashing rules applies to all firms and investor types. 

Key Challenges Identified

Respondents highlighted several difficulties in applying the SDR, which were summarised by the FCA:

• Respondents requested more time to implement the necessary changes to bring themselves into compliance with the SDR.
• Respondents questioned how the rules would apply to different types of portfolio management, including model, custom, and bespoke portfolios, and how the rule should apply to agent-as-client models.
• Respondents sought greater clarity on how disclosure requirements would interact with other sustainability reporting frameworks.
• Respondents raised practical concerns about how rules on naming and marketing would apply to different types of portfolios and client relationships.

FCA’s Position

The FCA noted that responses demonstrated ‘broad support for extending SDR to portfolio management’, but that challenges identified by respondents and stakeholders needed still to be carefully considered before the FCA could determine its next steps. 

In light of this, the FCA stated that it would instead prioritise its soon-to-be-released review into Private Market Valuation Practices, and a forthcoming multi-firm review focusing on conflicts of interest at firms managing private assets – as announced in February 2025. 

What’s Next?

The FCA’s decision to delay the extension of the SDR rules means that firms will not be required to make immediate changes to their processes and disclosures related to sustainability claims. However, the FCA reminded firms of their obligation to comply with the anti-greenwashing rule, which came into effect on 31 May 2024, and indicated that it will continue to monitor the industry’s progress and may revisit the proposal once the outstanding issues have been resolved.

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