The Financial Conduct Authority’s (FCA) decision to delay the publication of the final rules on applying Sustainable Disclosure Requirements (SDR) to portfolio management is unsurprising and signals a lack of market demand, according to Morningstar and PwC.
The FCA was expected to publish its final SDR rules to portfolio management in Q2 2025, after delaying them from late 2024, but has now scrapped the publication.
Speaking to IPE, Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics, said this further delay comes as no surprise, citing a lack of consistent disclosures available to portfolio managers as a potential issue.
“This delay doesn’t come as a surprise given that there have been delays before. There have been delays at almost every stage of the development and implementation of SDR,” said Bioy.
“While delays are not uncommon for a package of regulations, it probably still shows that this sustainability disclosure package for financial products was very ambitious, and time will tell if it was worth the time and efforts put into it.”
The FCA updated its website to say: “We are aware that it is taking longer than expected for some asset managers to comply with the SDR and labelling regime and of the potential impact this might have on portfolio managers.
“We want to ensure an extension of SDR to portfolio management delivers good outcomes for consumers, is practical for firms and supports growth of the sector.”
David Croker, partner at PwC UK, told IPE he felt asset managers would appreciate the respite following the delay, adding that the FCA’s comments on ‘growth’ signals its focus on the UK government’s growth agenda.
“This focus on ‘growth’ seems clearly linked to the wider FCA focus on delivering the UK government’s growth agenda,” said Croker.
The FCA’s decision comes at a time when the asset management sector has faced some challenges in implementing its SDR package.
Last year, PwC along with members of the UK Sustainable Investment and Finance Association (UKSIF) collaborated to offer asset management firms initial insights and recommendations for action as they implement various elements of the SDR package.
Croker went on to say he felt that overall the delay is helpful, as it allows the impact of the current rules to be better understood, mirroring previous calls for greater clarity to be provided to the sector.
“The extension will be welcomed by asset managers; most are still finalising their implementation of SDR for their UK funds and will appreciate the respite. Having experienced challenges from the FCA when looking to use labels for their funds, some firms may welcome a more permanent delay,” said Croker.
“There doesn’t appear to be significant market demand for labelled products or labelled portfolio management offerings at present, but this may change as the existing rules become better embedded, and investor understanding of the labelling regime increases,” he added.
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