SRI Services welcomes FCA’s landmark SDR consultation

by | Oct 26, 2022

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SRI Services welcomes the publication of the FCA’s new Sustainability Disclosure Requirements (SDR) and Investment Labels consultation paper.

This paper, CP 22/20, marks a major – and highly positive – turning point for retail sustainable investment.

It puts clients’ needs front and centre and in so doing tackles greenwash and trust issues head on.


It is a lengthy paper (179 pages) and may take a little while to digest, but it appears to be very much in line with what we discussed in DLAG – the FCA’s Disclosure and Labels Advisory Group.

Although it does not map precisely to other systems (eg SFDR)  the paper references them extensively as the FCA has been keen to compliment them where possible within the SDR.  Precise mapping would have been impossible as the focus of this paper is different.  It is primarily about clients – not the investment ‘industry’.

It’s purpose is to ensure that when clients are considering a sustainable investment they can trust what they see.  The result, these proposals, are the result of extensive consultation both across our industry and with clients.


The mechanisms they have chosen are, as indicated in the DP last year, a combination of labelling and requiring funds to say (and prove) what they do – from a sustainability perspective.

The paper proposes three sustainable fund labels – describing different sustainable fund approaches.

The labels are:

  • ‘Sustainable Focus’ for funds that invest in assets (equities, bonds etc) that are widely regarded as sustainable.
  • Sustainable Improvers‘ for funds that aim to encourage positive progress – often through engagement (stewardship) activity.
  • ‘Sustainable Impact’ for funds with a significant emphasis on delivering measurable real world progress.

Funds that do not meet these criteria will no longer be able to be called ‘sustainable’ as this – and other terms – will become protected.  (There is a section in the paper on naming and marketing).

Some thoughts from SRI Services founder, DLAG member,  Julia Dreblow:

“SRI Services is delighted to welcome this paper.  Its significance must not be underestimated in terms of its importance to financial services and beyond.


The line between what we once called ‘sustainable’ or ‘ethical’ funds and other funds has become blurred in recent years as ESG risks have become more urgent and more commonly integrated into many strategies.

The way some managers have dealt with this has however confused clients and eroded trust.  If no action were taken this would be likely to result in a very significant escalation in greenwash scandals and reduce investors’ ability to help address issues like climate change. 

It is of course highly positive that many more investors now consider ESG issues, but the lack of regulatory intervention has led to a ‘free for all’ – and made it incredibly difficult for intermediaries and end clients to know whether or not a fund really takes sustainability challenges seriously.  People need to be able to see what a fund is for (its purpose, policies and sustainability strategy) and how it approaches sustainability issues – in order to decide whether it chimes with their or their clients’ personal preferences.”


Funds that focus on sustainability will be required to align to a high level sustainability label, set out their sustainability aims and objectives and prove that they do what they have promised.  Other funds won’t be allowed to use the proposed labels.

“This is an entirely sensible, pragmatic approach.  It reflects what many leading funds already do – as many fund entries on our Fund EcoMarket database demonstrate – and because the focus is explaining to clients what a fund does there is no need for this to be particularly technical

The label that is most likely to attract attention, hopefully positively in due course, is the ‘improver’ category. 


The ‘stock selection vs engagement’ dynamic has caused much upset over recent years with funds that invest in major polluters surprising clients and being accused of greenwash.  By bringing this to the fore the FCA is striking a balance between encouraging quality stewardship (engagement) and making sure clients reasonable expectations are met. People who support these funds should expect them to hold controversial stocks, and expect managers to explain and report on the role they are playing in helping these companies to transition to sustainable practices. 

Clients who do not want to invest in controversial companies will now find it easier to recognise and avoid funds that focus significantly on engagement. They will be able to choose between the ‘sustainable focus’ and ‘sustainable impact’ fund labels.  The main difference between these will be funds that invest in assets they believe will be part of a sustainable future and funds that focus on ‘solutions companies’.  There will be cross over between these three groups in practice – the document explains further.”

The paper also considers other aspects of the wider landscape…

“I am delighted to welcome the proposal for an ‘anti greenwashing’ rule.  As well as misleading people – and undermining trust – greenwashing is distorting markets and hampering our ability to deal with existential threats.  It must be stamped out in all industries and regulators are the only entities that can make this happen.

The specific references to distributors, including advisers and platforms is also most welcome. If we are to ensure these messages reach clients all parts of the investment chain need to be involved.   Many continue to see discussing sustainability as optional.  It is not.  We know that many clients care about issues like climate change.  They must be given the option to invest in line with their opinions and be ‘part of the solution’.  Intermediary responses will of course be able to vary.  The regulator regularly refers to ‘guardrails’ in this area – so there will be a suite of possible responses – but the debate has now firmly shifted from ‘if’ to ‘how’ for distributors and intermediaries.

This is a hugely important and very positive day for our industry!”

View FCA press release and consultation paper here:

The consultation period will run until 25 January 2023.

The FCA’s client research can be found here.

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