Highlights

• FCA’s Sustainability Disclosure Requirements guide UK investment companies to improve transparency and avoid greenwashing.
• Most labelled funds come under the Sustainability Focus category, with slower uptake of Improver, Impact, and Mixed Goals labels.
• Firms are dependent on existing reports, including TCFD, to prepare for upcoming SDR disclosure requirements.

The UK Sustainable Investment and Finance Association (UKSIF) and PwC UK released a report examining the Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR) and the investment labelling regime.

The report draws on interviews with asset managers overseeing £19 trillion in assets and 29 labelled funds. It also includes insights from other firms affected by the SDR regime.

According to the paper, since its introduction in November 2023, the SDR has always been a market guide in the UK, which aims to reduce greenwashing and encourage businesses to improve governance and risk management in sustainability disclosures.

Read More: FCA Plans to Relax Climate Reporting Rules for Financial Firms

Practical issues during the SDR’s early implementation

Firms faced operational and interpretative hurdles while complying with the SDR rules, says the report, which led many to take a cautious approach. Sustainability label adoption has been limited, with problems around evidence expectations, resource intensity, and distributor engagement affecting firms’ responses.

Also Read: SFDR: Sustainable Finance Disclosure Regulation (EU) Explained

Nevertheless, firms began using existing frameworks and reports, such as TCFD, to prepare for upcoming disclosure requirements.

Report exploring different fund labels under the SDR

Most labelled funds fall under Sustainability Focus, with fewer funds in Improver, Impact, or Mixed Goals categories. The naming and marketing rules have emerged as a noticeable part of the regime, sometimes acting as a de facto fifth label.

Firms have carried out anti-greenwashing reviews and made improvements to match regulatory expectations, and many said that these actions helped them adapt to the new regime.

Final thought

Eventually, the analysis discusses the broader view of businesses on future SDR implementation. Companies highlighted the need for alignment with international disclosure regimes and clarity from the FCA regarding overseas fund coverage.

They also bring the spotlight on distributor engagement as a way to expand the use of SDR labels in the market.

See Also: 10 Best ESG Data Solutions and Services Provider Companies in the Netherlands in 2025

David Croker, Partner at PwC UK, said: “The SDR adds another layer of disclosure, but firms should see it as a strategic opportunity, not just a compliance exercise.

"While many are navigating data gaps and evolving guidance, the regime creates a chance to showcase credible management of sustainability risks and strengthen investment credentials.

“SDR challenges firms to better connect governance, product design and communication – done well, it builds trust and confidence, which are invaluable in a competitive market.”

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