UKSIF & PwC thought leadership report on the UK’s SDR: Initial insights and recommendations for implementation

Oscar Warwick Thompson
Oscar Warwick Thompson 30th May 2024

Alongside PwC, we have released our report on implementing the FCA’s Sustainability Disclosure Requirements (SDR) and investment labels rules (the ‘SDR package’). The report identifies implementation challenges that firms are facing, provides recommendations on how to address those challenges, and sets out an implementation roadmap to support asset managers and other firms in implementing the new rules.

UKSIF and PwC collaborated alongside our members, including representatives from our SDR Implementation Working Group, to offer asset management firms initial insights and recommendations for action as they implement various elements of the SDR package of regulation over this year. Challenges identified include fund labelling interoperability across different jurisdictions; uncertainty over the qualifying criteria and standards for the labelling categories; product governance challenges, and tight timelines for compliance with the ‘anti-greenwashing’ rule. The report sets out 10 recommendations for firms on responding to the challenges posed by the new regulation.

In brief, they are:

1. Carefully consider what label, if any, to apply to products under the SDR, taking into account any commercial benefits as well as client and stakeholder expectations and perceptions around labelled and unlabelled products.
2. Focus on demonstrating compliance with the 70% threshold for sustainable-labelled funds.
3. Establish a firm-wide product classification framework to manage the complexity within the SDR package as well as the international fragmentation of regulatory approaches.
4. Step up engagement with distributors at the earliest opportunity to ensure those distributors are comfortable with the core sustainability features of each product, the application of any labels, and any restrictions around non-labelled funds being offered.
5. Perform a broad, firm-wide greenwashing review to support compliance with the ‘anti-greenwashing’ rule.
6. Develop a taxonomy of terms that is applied internally to identify potential greenwashing and prevent it in the future.
7. Focus sustainability reporting on what is most relevant and material to your business and clients.
8. Streamline data collection and leverage existing reporting processes to avoid duplication and drive efficiencies.
9. Align reporting cycles with TCFD reporting where possible.
10. Adopt a strategic, long-term approach to reporting that creates value for your organisation.

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