Introduction
The Sustainability Disclosure Requirements (“SDR”) rules were published in November 2023 and were set out in the FCA’s policy statement PS23/16. These rules look to create transparency in the labelling of investment products in relation to sustainability claims. More information regarding the wider rules can be found in our article from December 2023 breaking down the rules.
Fast forward to September 2024; the Financial Conduct Authority (“FCA”) has provided an update on specific elements of the regime, specifically the “naming and marketing” and disclosure rules, which are due to come into force on 2nd December 2024. Firms are expected to have taken reasonable steps to meet this impending deadline.
Temporary Flexibility
With the December deadline looming, the FCA has outlined understanding that firms may require more time to meet expectations. This is especially the case for firms that require changes to investment labels or product names to meet the requirements of SDR.
The FCA’s main priority is to get SDR right for investors and has therefore introduced the temporary flexibility window to enable firms to comply with the “naming and marketing” rules in relation to financial instruments that meet the FCA’s definition of a sustainability product that is a UK authorised investment fund. The temporary flexibility window will allow firms a longer period to implement processes and frameworks to ensure that they comply with the SDR naming and marketing expectations.
Who is Eligible to Apply and What are the Deadlines?
In order to benefit from this flexibility, firms must:
- Using currently one or more of the terms ‘sustainable’, ‘sustainability’ or ‘impact’ (or a variation of those terms) in the name of that fund and is intending either to use a label, or to change the name of that fund; and
- Submit a completed application for approval of amended disclosures in line with ESG 5.3.2R for that fund by 5pm (UK time) on 1st October 2024. Applications are to be made through the FCA’s Connect system.
Firms that meet these criteria and are granted permission to utilise the temporary flexibility window, will see the deadline extended until 2nd April 2025 at the latest to make the necessary changes. If changes can be made before this deadline, the FCA expects firms to do so. Also, if firms can meet the original deadline, then they should do so and not apply for the extension.
It is important to note that the extension applies only to the disclosure requirements and firms must continue to comply with other rules, such as the anti-greenwashing provisions.
See the FCA webpage for further details.
How Complyport Can Help
Having to navigate the ever-evolving SDR landscape within the financial services sector can be time-consuming. Our consultants can offer a tailored and flexible approach to ensure your firm is prepared. We offer:
- Assist with preparation and submission of SDR applications;
- SDR/ESG Readiness Assessments;
- SDR/ESG Review against categories;
- Policy and procedure updates;
- Ongoing support for any questions regarding the new regulations; and
- SDR/ESG Training.
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