Boundary

A different regime from UK SRS

SDR sits in the FCA Handbook's ESG Sourcebook — chapters ESG 3, 4 and 5 — a self-contained regime for how investment products are labelled, named and disclosed to investors FCA Handbook ESG 4.1.

It is not the same thing as the mandatory UK SRS reporting the FCA has proposed under CP26/5 for certain listed issuers, delivered through an entirely different part of the Handbook, the UK Listing RulesFCA CP26/5.

Nor is it TCFD: the TCFD-aligned Listing Rule CP26/5 proposes to repurpose for UK SRS reporting, UKLR 6.6.6R(8), sits in the Listing Rules alongside UK SRS, not in the ESG SourcebookFCA CP26/5.

A listed asset manager can be in scope of all three at once, for three different reasons.

Read the rule as drafted

A prohibition, not a permission

ESG 4.1.1R(1) does not grant four labels; it bans them, then carves out an exception.

Verbatim: a firm “must not make use of” Sustainability Focus, Sustainability Improvers, Sustainability Impact or Sustainability Mixed GoalsFCA Handbook ESG 4.1.1R(1).

ESG 4.1.1R(2) then permits a qualifying manager to use one, “from 31 July 2024”, where the underlying product meets the criteria in ESG 4.2 FCA Handbook ESG 4.1.1R(2).

The distinction is not pedantry.

A manager that markets a label without meeting the criteria has not merely failed to earn a badge — it has breached a prohibitionFCA Handbook ESG 4.1.1R.

The labels are available only to specific manager types: a UK UCITS management company, an ICVC that is a UCITS scheme without a separate management company, a full-scope UK AIFM, or a small authorised UK AIFMFCA Handbook ESG 3.1.2R(3)–(4).

The qualifying tests

General criteria before any label-specific test

Every label shares a common floor, set at ESG 4.2.4RFCA Handbook ESG 4.2.4R:

  • An explicit sustainability objective that is clear, specific and measurable
  • At least 70% of the gross value of the product’s assets invested in accordance with that objective
  • Assets selected against a robust, evidence-based standard that is an absolute measure of environmental and/or social sustainability
  • Assets outside the 70% must not have attributes that conflict with the objective
  • Robust, evidence-based key performance indicators to measure progress

Manager-level criteria, at ESG 4.2.9R, add an assessment of the standard that is independent from the manager's own investment process, an escalation plan, and a stewardship strategyFCA Handbook ESG 4.2.9R.

Every label must be reviewed at least every 12 monthsFCA Handbook ESG 4.1.11R(2)(a).

Four tests, one rule each

The four labels

On top of the general floor, each label carries its own specific testFCA Handbook ESG 4.2:

  • Sustainability Focus (ESG 4.2.13R) — the assets themselves already are environmentally or socially sustainable
  • Sustainability Improvers (ESG 4.2.14R–4.2.15R) — assets with the potential to improve over a stated timescale, with short- and medium-term targets
  • Sustainability Impact (ESG 4.2.16R–4.2.17R) — a pre-defined, positive, measurable impact, supported by a theory of change
  • Sustainability Mixed Goals (ESG 4.2.18R–4.2.19R) — combines two or more of the three tests above

No FCA seal of approval

Notification, not approval

Adopting a label requires only notification to the FCA through its Connect systemFCA Handbook ESG 4.1.7R— there is no approval step.

A manager must not claim, expressly or by implication, that the FCA has conferred or approved the use of a label, or that a label means the FCA has endorsed the productFCA Handbook ESG 4.1.5R(2).

What using a label triggers

The reporting that follows a label

Using a label, or one of the naming-and-marketing restricted terms, triggers a consumer-facing disclosure and a pre-contractual disclosure, and starts the clock on a product-level report — due within 16 months of first use, with a 30 June 2026 longstop for managers who started before 28 February 2025FCA Handbook ESG 5.4.3R(1).

A separate, entity-level report is required regardless of whether a manager uses a label at all, once it uses one of the restricted termsFCA Handbook ESG 5.4.2R: by 2 December 2025 for a manager that meets the FCA's enhanced-SMCR test, and by 2 December 2026 for other in-scope managers with £5 billion or more in assets under management, on a three-year rolling average FCA Handbook ESG 5.4.3R(2).

The enhanced-SMCR test itself runs through a cross-reference to SYSC 23, and that threshold rose from £50 billion to £65 billion AUM on 10 July 2026FCA Handbook ESG 5.4.3R(2)(a)— a manager below £5 billion AUM is exempt from the entity-level report altogetherFCA Handbook ESG 3.1.3R.

Where the regime stops

Portfolio management is not in scope — yet

A 2024 consultation, CP24/8, proposed extending the labelling and disclosure rules to portfolio management FCA CP24/8.

In February 2025 the FCA said it was “not the right time to finalise rules on extending SDR to portfolio management”, and no date has since been setFCA CP24/8.

That leaves a manager running segregated mandates for institutional clients, including pension schemeportfolios, outside the labelling and product-disclosure rules covered on this page — but not outside the FCA's sustainability regime altogether: the anti-greenwashing rule binds a portfolio manager regardless, exactly as it binds every other FCA-authorised firmFCA CP24/8.