FCA pauses Sustainability Disclosure and Labeling plans for portfolio managers

The Financial Conduct Authority (FCA) announced the pause of its plan to broaden the Sustainability Disclosure Requirements (SDR) and sustainable investment labelling regime to include portfolio managers. The regulatory body took the decision instead of the broad support from the industry stakeholders, and businesses. 

This gives asset managers, impact investors, and private market firms more time to adapt to existing sustainability regulations, but may also delay the creation of a consistent, transparent framework for sustainable investment products and portfolios-leaving firms reliant on existing anti-greenwashing rules. 

Let’s explore the FCA decision to pause SDR in detail. 

Background

The FCA introduced its Sustainability Disclosure Requirements (SDR) and investment labelling rules in late 2023 to improve transparency and tackle greenwashing. In 2024, it planned to extend these rules by releasing a consultation paper to include portfolio managers covering wealth managers and retail portfolios. However, after industry feedback, the FCA paused the rollout on April 30 2025, citing the complexity of applying the rules to varied portfolios. While there is strong industry support, the FCA is taking time to ensure firms are ready and that the new rules align well with existing requirements.

“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.” said FCA. 

Key aspects of the halt in SDR and Labeling plans

  • The FCA highlighted significant operational and implementation challenges raised during consultation, including the complexity of applying the rules to diverse portfolio types, naming conventions, interaction with existing sustainability disclosures, and practical labelling guidance.
  • Feedback from the industry expressed serious doubts about the implementation's feasibility for portfolio managers. The respondents requested additional time to comply, clearer guidance on scope and marketing rules, and better alignment with other regulatory requirements. 
  • The FCA intends to prioritize a forthcoming multi-firm review of model portfolio services focusing on Consumer Duty and investor outcomes before proceeding with SDR extension. This reflects a cautious approach to ensure portfolio managers are adequately prepared and the regime is coherent and effective before imposing new requirements. 

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