FCA commits to delayed SDR review

The regulator is considering tightening the rules on SDR requirements and investment labels which could see much tougher restrictions on the use of labels such as ESG.

The aim is to avoid the abuse of sustainability rules and to tackle ‘greenwashing’ – the marketing of funds as ‘green’ or ‘environmentally-friendly’ when their credentials are suspect.

The FCA says that its aim is for consumers to be able to trust sustainable investment products.

Its recent consultation on a package of measures to build confidence in the sustainable fund and product market closed in January and received about 240 written responses.

The FCA said there was “broad support” for its proposed new regime and there had been “constructive feedback” on the details.

Because of the volume of feedback the FCA said it planned to publish a Policy Statement in Q3 this year, several months later than planned.

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The FCA said: “We are carefully considering the feedback to ensure that first and foremost the regime protects consumers but also recognises and takes account of any practical challenges that firms may have.

“This includes, but is not limited to, considering our approach to the marketing restrictions, refining some of the specific criteria for the labels and clarifying how different products, asset classes and strategies can qualify for a label, including multi-asset and blended strategies.”

The watchdog said the Policy Statement would also clarify matters such as that primary and secondary channels for achieving sustainability outcomes are not prescribed, and that it does not require independent verification of product categorisations to qualify for a label.

It accepts some products may not qualify for a sustainability label, but may still have some sustainability-related characteristics.

The FCA plans to continue to engage with its Disclosures and Labels Advisory Group and other stakeholders, including consumer groups.

Gemma Woodward, head of responsible investment at Quilter Cheviot, said: “Given the complexity of the topic and the scale of the response from the industry, it is good to see the FCA take its time with its policy statement on the Sustainability Disclosure Requirements.

“There is a mass of sustainable and responsible regulation being introduced just now, so it is important firms are given the time to plan and resource effectively and make the new policies a success. It is also vital that time is taken to make these final policies clear, concise and not allow them to lead to further confusion. It is vital sustainable and responsible investing is a success and part of this is ensuring advisers and investors can feel confident in what they are investing in. 

“It is particularly pleasing to see the FCA call out potential changes to its approach on marketing, specific criteria for the labels and how different products can qualify for a label. These are important sticking points, so it will be interesting to see what the FCA concludes from the consultation responses.”

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