Delay to FCA's anticipated rules on sustainable disclosures and investment labels

The FCA's Policy Statement in response to the Sustainable Disclosure Requirements (SDRs) and investment labels' consultation will now be published in Q3 2023 instead of H1 2023, according to an FCA update.

Once published, the Policy Statement will set out the FCA's rules on:

• product- and entity-level disclosures;
• product naming and marketing;
• sustainable investment labels; and
• qualifying criteria that firms must meet to use a label.

These measures are intended to help retail investors understand and navigate the complexities of the investment product landscape and to safeguard them against greenwashing (sustainability claims that are false, misleading or unsubstantiated), thereby building transparency and trust in the financial markets.

You may recall that these measures have as their genesis the government's announcement in July 2021 of its intention to create an integrated framework for decision-useful sustainability disclosures. Further details of the government's package of proposals for "greening" the UK financial system were then set out in its October 2021 report, A Roadmap to Sustainable Investing. This report covered proposals relating to the SDRs and the UK Green Taxonomy (criteria that certain economic activities must meet to be considered environmentally sustainable). We gave an update on the UK Green Taxonomy in an earlier note (see here).

The FCA, the regulator responsible for the SDRs insofar as they relate to FCA-regulated firms, began its consultation on its sustainability disclosures and investment labels regime in October 2022 (closed in January 2023). According to the consultation paper, the core elements of the regime – disclosure and naming and marketing rules, and labelling and classification – will only apply to asset managers at the outset, though a general "anti-greenwashing" rule will immediately apply to all firms. The consultation also proposed targeted rules for distributors of investment products to UK retail investors, and invited views on whether FCA-regulated asset owners should be brought into the fold of the regime in respect of their investment products.

There is clearly widespread interest in the FCA's Policy Statement given the approximately 240 written submissions received in response to the consultation. Indeed, the regulator cites the "significant response" as the reason for the Policy Statement's delay. This will have a knock-on effect on the proposed effective dates but, according to the FCA's update (see above), these will be adjusted accordingly.