Publication of the much anticipated Sustainability Disclosure Requirements (SDR) by the UK’s Financial Conduct Authority (FCA) has once more been pushed forward, this time to the end of this year.
The SDR has been presented as an alternative to the EU’s Sustainable Finance Disclosure Regulation (SFDR), which has been effective since March 2021.
However, the SFDR has faced issues such as developing in a “de facto” labelling regime which was not the original intent, and mass downgrade of Article 9 (impact) funds to Article 8 (ESG-linked) when disclosure requirements tightened at the start of the year.
During its consultation phase the SDR has faced its own issues, with the Institutional Investors Group on Climate Change expressing “serious concerns” that the proposed three labels being mutually exclusive would not be effective when applied to sectors such as blended finance.
Of the delay, James Alexander, chief executive of the UK Sustainable Investment and Finance Association, called the FCA's move to delay “disappointing".
“We need to get these regulations published and in operation as soon as possible to build market confidence in sustainable products and give the industry certainty on how the SDR and labels regime will operate.”
Alexander also expressed concerns that in his view the delay was “symptomatic” of the slow pace of implementation of other policies announced in the UK government’s Green Finance Strategy in March this year.
This includes upcoming corporate disclosure requirements and the country’s own Green Taxonomy, again presented as an alternative to the EU’s taxonomy with a key distinction being the incorporation of nuclear as a sustainable activity.
On the SDR, a statement from Nikhil Rathi, chief executive at the FCA, and Sam Woods, deputy governor for prudential regulation at the Bank of England, said: “Following the FCA’s Sustainability Disclosure Requirements and investment labels consultation and the range of comments, we have decided to publish the Policy Statement in Q4 2023, having been previously planned for Q3 2023."
“These policy changes will help the UK’s asset management sector thrive by setting standards that improve the sustainability information consumers have access to.”
