With recent concerns about greenwashing entering the broader narrative of sustainable investing and key goals such as net zero, some consider this a timely intervention.
While the SDR aligns with similar regulations like the EU’s Sustainable Finance Disclosure Regulation introduced in 2021, it provides the most precise rules and forward-thinking framework for the UK’s sustainable investment markets to date. It offers a robust set of benchmarks for end consumers to evaluate the market.
In this context, the regulations have the potential to transform how capital is allocated toward achieving net zero.
However, as with any significant new legislation, the SDR presents both opportunities and challenges for wealth managers and advisers. With the July 31 deadline for labelling approaching, we outline the essential details and the steps companies should take to prepare.
The SDR in a Nutshell
The SDR is a new set of regulations from the Financial Conduct Authority aimed at improving trust and transparency in the sustainable investment fund market while addressing greenwashing concerns for investors.
The new regime includes an anti-greenwashing rule applicable to all products and services from UK companies, whether as manufacturers or distributors. The labelling, naming, and marketing aspects, however, only apply to UK-domiciled funds. It is anticipated that the regime may eventually extend to offshore funds distributed in the UK.
The SDR consists of several components and steps. The first, the new anti-greenwashing rule, took effect on May 31, 2024. The remaining rules will come into full effect on December 2, 2024.
