UKSIF response: FCA Discussion Paper on Sustainability Disclosure Requirements (SDR) and investment labels

Oscar Warwick Thompson
Oscar Warwick Thompson 10th January 2022

In our response to the Discussion Paper, we focus on the following points:

  • How a single, harmonised set of sustainability disclosures for all clients groups could be explored further by the FCA as an alternative to the proposed two-tiered approach for sophisticated clients and consumers. This could be achieved through a ‘stacking’ or ‘layering’ approach that we expect would require innovative, digital solutions and could be a fairer model to pursue.
  • Consideration being given to the effective sequencing of the UK’s taxonomy with SDR (particularly given taxonomy reporting forms a key elements of SDR), and ensuring the taxonomy is operating smoothly before SDR comes into effect. At a minimum this means awaiting the finalising of the TSC for the climate change mitigation and adaptation objectives.
  • The need to ensure consistency between Europe’s SFDR and SDR while avoiding some of the flaws of SFDR and maintaining the credibility of the UK’s system. Consistency will be important for our members but we will need to be alert to the dangers involved in mapping SFDR’s categories across to the UK system (e.g. Article 8 funds should not automatically qualify as ‘Sustainable’ in the UK).
  • The importance of ‘entry-level’ criteria at the firm level before funds can be considered ‘sustainable’. We see this as important in driving up standards across the industry, and these criteria would be proportionate (signatory status against the Stewardship Code or PRI, or membership of a net-zero initiative).
  • The necessity of incorporating biodiversity and nature in SDR, with a recommendation the FCA consider consulting how to incorporate TNFD into the new framework.
  • A call for greater clarity for funds falling in the ‘Sustainable – Transitioning’ category, which will play a particularly important part in the UK meeting its net-zero objective.

We will be reiterating these points from our response, and other views from our members, to the FCA through our membership of the Disclosure and Labels Advisory Group (DLAG).

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