The UK’s Financial Conduct Authority (FCA) has paused its plan to expand the Sustainability Disclosure Requirements (SDR) and sustainable investment labelling rules to portfolio managers. This decision follows industry feedback highlighting challenges in applying ESG regulations across diverse portfolio structures and aligning them with existing sustainability disclosure regimes. 

Originally proposed in April 2024, the SDR extension sought to include wealth managers and retail model portfolios under the same ESG compliance framework already applied to asset managers. The broader regime, introduced in November 2023, includes anti-greenwashing rules and a standardized labelling system for sustainable investments. 

Despite strong backing from industry stakeholders who agree the extension would improve transparency and consumer outcomes, the FCA has opted to delay its final Policy Statement. In a February 2025 update, the regulator said, “It is not the right time to finalize rules on extending SDR to portfolio management.” 

The feedback revealed operational hurdles that need resolution before the rule can be successfully implemented. Concerns included the complexity of applying naming conventions to various portfolio types, difficulties in synchronizing the new rules with other sustainability reporting obligations, and a lack of practical guidance for applying ESG labels within different portfolio contexts. 

By pausing the extension, the FCA demonstrates a commitment to regulatory clarity and sector readiness, rather than rushing through reforms that could lead to compliance confusion. Portfolio managers and wealth management firms now await a revised implementation timeline and further regulatory guidance. 

This development underscores the importance of ESG integration in financial services while acknowledging that a one-size-fits-all approach may not be feasible across the board. The FCA’s measured response highlights its intent to support a smoother transition toward a transparent, accountable, and effective ESG disclosure and carbon neutral strategy for portfolio managers in the UK. 

Sources: 

https://esgnews.com/fca-pauses-extension-of-sustainability-disclosure-and-labelling-rules-for-portfolio-managers/  

https://professionalparaplanner.co.uk/fca-presses-pause-on-sdr-for-portfolio-managers/