FCA Proposes Anti-Greenwashing and Sustainability Disclosure Rules for Portfolio Managers

The Financial Conduct Authority (FCA), the UK’s conduct regulator for financial services, has announced a consultation on extending its Sustainability Disclosure Requirements (SDR) to portfolio managers. The SDR aims to assist investors in evaluating the sustainability attributes of investment products and mitigate the risk of greenwashing. The FCA previously released SDR requirements for asset managers in November 2023, which included rules for sustainability-related product claims, naming and marketing funds based on sustainability characteristics, and a sustainable investment product labeling regime. While the initial SDR was primarily developed for retail investors, the proposed extension would apply to firms managing investments for consumers, particularly focusing on wealth management services for individuals and model portfolios for retail investors. The FCA clarified that portfolio management services for professional clients would be exempt from the naming and marketing requirements. The SDR includes an anti-greenwashing rule to ensure that claims about the environmental or social characteristics of financial products are fair, clear, and consistent with their sustainability profile. It also introduces labeling categories to differentiate between sustainability objectives and investment approaches. Under the proposal, portfolio managers would be subject to the naming and marketing rule from December 2, 2024, and would be able to use the labeling system concurrently with asset managers. Firms with assets under management exceeding £50 billion would need to provide product-level disclosures under the SDR from December 2025, while those with AUM greater than £5 billion would have to comply from December 2026. The FCA has also released finalized guidance to help firms meet the new rules, including examples of good practice and clarification on the scope of the anti-greenwashing rule. Sacha Sadan, the FCA’s Director of Environmental, Social, and Governance, emphasized that these developments maintain the UK’s position at the forefront of sustainable investment and provide guidance for firms to market their products appropriately. Resources: https://www.esgtoday.com/fca-proposes-anti-greenwashing-and-sustainability-disclosure-rules-for-portfolio-managers/