FCA postpones publication of sustainability disclosure rules for second time

The FCA had originally planned to publish its sustainability disclosure requirements (SDR) in June 2023, before delaying the publication until the third quarter of the year. The latest postponement, announced earlier this month, means the SDR rules will not be published until the fourth quarter – along with regulations for investment labels and a proposed new ‘anti-greenwashing’ rule.

Sustainability expert Hayden Morgan said the further delay appeared, in part, to be due the range of comments the FCA received on its consultation paper. “Given the relationship with other existing regimes and, I suspect, the volume and complexity of consultation feedback, the FCA has considered it needs more time to develop a robust policy.”

Morgan added: “We have seen in other jurisdictions the effect of imposing sustainability disclosure regulatory requirements with suboptimal and, arguably, even perverse, real-world outcomes. In this regard, the FCA has second-mover advantage. Ultimately, however, firms need clarity over fund labelling and avoiding inadvertent greenwashing in disclosure – something that the increased delay does not help with.”

Additionally, the proposed SDR labels provide fund and portfolio managers with the unique opportunity to label transitional assets. The SDR rules are primarily aimed at UK-based fund managers, portfolio managers and distributors of UK UCITS funds, alternative investment funds and segregated mandates. They are, however, also relevant to all FCA-regulated firms.

The FCA’s original consultation paper, published October 2022, stated that its “anti-greenwashing rule” would apply immediately on publication of the new SDR rules. Sébastien Ferrière of Pinsent Masons said it was likely, therefore, that the anti-greenwashing rule – in whichever form it eventually takes – will start to apply in the fourth quarter of 2023.

He added: “The FCA has, however, previously stated that the proposed general anti-greenwashing rule would merely reiterate existing rules, to clarify that sustainability-related claims must be ‘clear, fair and not misleading’.”

“The FCA believes that it can already take enforcement action against suspected greenwashing, including where greenwashing has occurred before the new rule comes into force. The intention is that the new rule would simply facilitate such action in future,” Ferrière said.

He added: “Given the FCA’s increasingly interventionist approach toward tackling potential misconduct within financial markets in recent years, regulated firms should tread carefully when they make sustainability-related claims in respect of their products or services.”