FCA pauses the extension of SDR to portfolio management

On 30 April 2025, the FCA announced that it has paused its plans to extend the Sustainability Disclosure Requirements (SDR) and investment labels regime to portfolio management (please see the FCA’s April Update on its webpage here). 

In April 2024 the FCA consulted on the extension of the SDR and investment labels regime to portfolio management (CP 24/8). We covered the FCA’s proposals in detail in our blog post here. The FCA has since reflected on the feedback received as part of the consultation process (which ended in June 2024) and decided not to finalise the rules on extending SDR to portfolio management at this time.  

Consultation feedback

In CP 24/8, the FCA proposed a similar labelling approach for portfolio managers as for fund managers, which was intended to ensure consistency and to create a level playing field. This followed the FCA’s policy statement (PS 23/16) on SDR and investment labels, which introduced measures for fund managers.

According to the FCA, there was broad support for extending SDR to portfolio management, with most respondents to the CP agreeing this is an important step toward improving consumer outcomes. However, five key challenges were raised:

1. Scope: The FCA proposed applying the regime to various portfolio management types, including model portfolios, customised portfolios and bespoke portfolios. Feedback included concerns around the application of the rules to bespoke portfolios, which are customised to meet the individual client’s needs, and to agent-as-client models where advisers act as professional clients of portfolio managers. Further consideration and clarification of scope is likely to be required.
2. Implementation timelines: The FCA originally proposed that the regime should come into force for portfolio managers by 2 December 2024. Respondents raised concerns with respect to the feasibility of the proposed timeline in light of the scale and complexity of the work required to assess implications and implement required changes. It was also suggested that more time would be helpful for the UK funds regime to bed in, and for further clarity to be provided on extending the SDR to funds in the Overseas Funds Regime.
3. Labelling portfolios: The FCA proposed that portfolios could use a label if they meet certain qualifying criteria. It received feedback on the practical application of these criteria for portfolio managers, considering their varied roles, responsibilities, resources, and the types of products and services they offer compared to asset managers. In particular, questions were raised about a possible ‘look-through’ approach to the 70% sustainability threshold for portfolios, including with respect to the FCA’s statement that ‘a label is not an absolute measure of sustainability’.  
4. Naming and marketing: The FCA proposed that portfolio management offerings to retail investors should follow the naming and marketing rules. Feedback was broadly supportive, but called for clarity on applying these rules to different portfolio types and client relationships in line with comments made on scope.
5. Disclosures: The FCA proposed a tiered approach to disclosures, including consumer-facing, product-level, and entity-level reports. This was a departure from previous proposals which enabled portfolio managers to provide access to certain disclosures for underlying products or to provide certain information pursuant to an ‘on-demand’ regime. Whilst a number of concerns were raised, the FCA noted that feedback was broadly supportive but called for clarity on practical considerations and interactions with other sustainability reporting requirements.

The new plan

The extension of SDR to portfolio management is not off the table, but the FCA wants to take time to carefully consider the feedback and various challenges raised in order to ensure that portfolio managers are positioned to implement the regime effectively before introducing any requirements. There is no indication of any particular timetable for the FCA’s next steps.

In the meantime, the FCA has noted that it intends to prioritise the upcoming multi-firm review into model portfolio services (as announced in the Asset Management & Alternatives portfolio letter). The review will assess firms’ application of the Consumer Duty to ensure investors receive good outcomes from model portfolio services. 

As part of the April Update, the FCA also took the opportunity to remind firms of their obligation to comply with the anti-greenwashing rule (considered in our blog post here), which came into effect on 31 May 2024.