The UK Sustainability Disclosure Requirements (SDR) are the FCA’s framework for sustainable investment labelling, naming and marketing in the UK — introducing four investment product labels, an anti-greenwashing rule, consumer-facing disclosures and entity-level TCFD reporting obligations for UK-regulated asset managers.

What Is UK SDR?

The UK Sustainability Disclosure Requirements (SDR) are the FCA’s framework for sustainable investment product labelling, naming, marketing and disclosure in the UK. Introduced through PS23/16, UK SDR applies to FCA-regulated asset managers and, over time, portfolio managers and financial advisers. Its objectives are to prevent greenwashing, give consumers reliable information about sustainable investment products, and build trust in the UK sustainable finance market.

The Anti-Greenwashing Rule

The anti-greenwashing rule applies to all FCA-regulated firms from May 2024 — the first element of UK SDR to come into force. It requires that all sustainability-related claims made in communications to clients are fair, clear and not misleading. This applies not only to product-specific claims but to general firm-level statements about sustainability credentials, ESG approaches and climate commitments. The rule extends the existing fair, clear and not misleading standard in COBS 4.2 to sustainability claims specifically.

The Four Investment Labels

UK SDR introduces four voluntary investment labels for asset managers wishing to describe their products using sustainability terminology. Sustainability Focus: products investing in assets that are environmentally or socially sustainable by reference to a robust, evidence-based standard. Sustainability Improvers: products investing in assets with the potential to improve sustainability over time. Sustainability Mixed Goals: products with at least 70% in assets meeting the criteria for one of the other labels. Sustainability Impact: products with a defined objective to achieve a positive, measurable sustainability impact. Each label has specific qualifying criteria, ongoing monitoring requirements and disclosure obligations.

Naming and Marketing Rules

From December 2024, firms within scope cannot use sustainability-related terms — such as ‘ESG’, ‘green’, ‘sustainable’, ‘responsible’, ‘climate’, ‘impact’ or ‘ethical’ — in the name of a product unless that product holds one of the four SDR labels. This naming restriction applies to all UK retail fund names and is the provision most likely to require immediate action from firms that have used sustainability terminology loosely in existing product names.

Consumer-Facing Disclosures

Products holding an SDR label must produce a consumer-facing disclosure document — a short, accessible summary designed for retail investors — covering the sustainability objective, how it is pursued, the key sustainability metrics and a summary of the annual report. The document must be written in plain language and must be made available to retail investors before they invest.

Entity-Level TCFD Disclosures

Large in-scope UK asset managers must publish an annual entity-level TCFD report covering governance, strategy, risk management and metrics across the firm’s investment activities. This requirement builds on the FCA’s existing mandatory TCFD rules and adds UK SDR-specific reporting on how sustainability risks and opportunities are managed at the firm level.

UK SDR vs SFDR

UK SDR and SFDR address the same underlying policy goal — preventing greenwashing and enabling investor comparison of sustainable products — but through different mechanisms. SFDR uses a classification system (Articles 6, 8, 9) that attaches to any product marketed to EU investors. UK SDR uses voluntary labels available only to products meeting specific qualifying criteria. UK firms with both UK and EU operations must manage both frameworks, which are not directly equivalent and require separate compliance programmes.

The Compliance Function’s Role

UK SDR compliance requires the compliance function to: advise on whether existing and proposed product names comply with the naming rules; review marketing materials and client communications for anti-greenwashing rule compliance; oversee the labelling qualification assessment for products seeking to hold a label; manage the ongoing monitoring obligations for labelled products; and coordinate the entity-level TCFD disclosure process. The ESG compliance specialism is one of the fastest-growing areas of compliance recruitment, and firms without existing sustainability expertise are increasingly seeking specialist hires.

Adrian Lawrence FCA — Founder, FD Capital Recruitment Ltd

ICAEW Registered Practice | Companies House No. 13329383

“UK SDR is creating a significant compliance implementation challenge for UK asset managers — the labelling criteria, the ongoing monitoring obligations and the consumer-facing disclosure requirements all require dedicated compliance resource with sustainability expertise. We place heads of compliance and compliance officers with ESG and SDR experience across UK-regulated asset management and wealth management firms.”

Recruiting an ESG or SDR Compliance Specialist?

FD Capital places compliance officers with UK SDR and anti-greenwashing rule expertise across UK asset managers — on interim, fractional and permanent mandates.

Compliance Recruitment
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