FCA rules · SDR

FCA SDR investment labels: the four-label test, in full

The FCA’s SDR investment labels let a qualifying fund manager put one of four labels on a fund, but ESG 4.1.1R is written as a prohibition, and using a label without qualifying breaches it.

SDR sits in the ESG sourcebook of the FCA Handbook and governs how funds are labelled, named and sold.

It is a live set of rules, and a different regime from UK SRS, which reaches listed companies through the listing rules.

The four labels →Anti-greenwashing rule

Checked against 15 sources fromFinancial Conduct AuthoritySee the sources

Where SDR sits

A different regime from UK SRS

The Sustainability Disclosure Requirements were made in PS23/16 in November 2023.

They are a self-contained regime in chapters 3, 4 and 5 of the ESG sourcebook, covering how investment products are labelled, named and disclosed to investors.

UK SRS is something else: the FCA consulted in CP26/5 and, on 30 September 2026, published PS26/19, requiring listed companies to report against UK SRS on a comply-or-explain basis.

A listed asset manager can therefore be in scope of SDR for its funds, of UK SRS as a listed company and of the TCFD entity-report rules as a manager, for three different reasons.

The manager-level picture is on the UK SRS for asset managers page.

The naming rules that apply whether or not a fund carries a label, and the anti-greenwashing rule that applies to every firm, are on the companion FCA anti-greenwashing rule guide.

	SDR	UK SRS
Where	FCA Handbook, ESG 3, 4 and 5	UK Listing Rules, via PS26/19
About	Products: labels, names, fund disclosures	Companies: their own risks and metrics
Who	Fund managers (labels); all firms (anti-greenwashing)	Listed issuers
Status	In force	Final; periods from 1 Jan 2027

How the rule is drafted

A prohibition, not a permission

ESG 4.1.1R(1) does not grant four labels; it says a firm “must not make use of” Sustainability Focus, Sustainability Improvers, Sustainability Impact or Sustainability Mixed Goals.

ESG 4.1.1R(2) then allows a manager, from 31 July 2024, to use one where the product meets the criteria in ESG 4.2.

The distinction matters: a manager that markets a label without meeting the criteria has breached a prohibition, not merely failed to earn a badge.

The labels are available only to managers of in-scope products under ESG 3.1.2R: 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 AIFM.

In the FCA’s plain-English summary, the labels can only be used for UK UCITS and UK AIFs.

General criteria

The floor every label stands on

Before any label-specific test, ESG 4.2.4R sets a common floor.

Objective

Clear, specific and measurable

An explicit sustainability objective, environmental and/or social.

70%

Of gross asset value

At least 70% of the gross value of the product’s assets invested in accordance with the objective.

Standard

An absolute measure

Assets selected against a robust, evidence-based standard that is an absolute measure of sustainability.

The other 30%

No conflicts

Assets outside the 70% must not have attributes that conflict with the objective.

KPIs

Evidence of progress

Robust, evidence-based key performance indicators.

Manager

Independent assessment

ESG 4.2.9R: an assessment independent of the investment process, an escalation plan and a stewardship strategy.

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

ESG 4.2.7G, added in December 2025 by Handbook Notice 136, gives guidance on systematic methodologies and the index-tracker route, so a note on ESG 4.2 written in 2024 is out of date.

The four labels

The four SDR labels and what each requires

Source: FCA Handbook ESG 4.2.
Label	Rules	The specific test
Sustainability Focus	ESG 4.2.13R	Assets that are environmentally or socially sustainable, against an absolute standard
Sustainability Improvers	ESG 4.2.14R–4.2.15R	Assets with the potential to improve, with a timescale and 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	Invests in line with two or more of the other three objectives

Holding a label does not free a fund to use any word it likes in its name.

A manager using Focus, Improvers or Mixed Goals must not use the word “impact” in the product’s name (ESG 4.3.4R(2)); in a name, the word is reserved for the Impact label.

The wider naming rule — thirteen restricted terms, and the ten an unlabelled fund may still use on conditions — is set out on the anti-greenwashing and naming rules guide.

The FCA published further examples of good and poor practice for SDR labels in February 2026, on its SDR regime page.

Notification

Notification, not approval

A manager adopting a label notifies the FCA through its online system under ESG 4.1.7R.

There is no approval step, which is exactly why the rules forbid a manager from implying one.

A fund described as carrying an “FCA-approved label” is making a claim the Handbook prohibits.

Never “FCA-approved”

ESG 4.1.5R(2) forbids a manager from claiming, expressly or by implication, that the FCA has conferred or approved a label, or that a label means the FCA endorses the product.

Disclosures

The reporting that follows a label

Using a label, or one of the restricted sustainability terms, triggers a consumer-facing disclosure — no longer than two pages of A4 under ESG 5.2.6R — and a pre-contractual disclosure.

It also starts the clock on a product-level report, due within 16 months of first use under ESG 5.4.3R(1), with a 30 June 2026 long-stop for managers that started before 28 February 2025.

A separate entity-level report is required whether or not a manager uses a label, under ESG 5.4.2R.

It was due by 2 December 2025 for a manager meeting the enhanced SM&CR test, and is due by 2 December 2026 for other managers with £5bn or more in assets under management on a three-year rolling average.

The enhanced SM&CR test runs through a cross-reference to SYSC 23, and that threshold rose from £50bn to £65bn of assets under management on 10 July 2026.

A manager below £5bn is exempt from the entity-level report under ESG 3.1.3R.

These thresholds belong to SDR and have nothing to do with whether a manager’s own listing brings it under UK SRS.

2 Dec 2024
Naming rules long-stop
ESG TP 1.9R: the earlier of first label use or this date.
2 Dec 2025
Entity report — enhanced SM&CR managers
ESG 5.4.3R(2)(a).
30 Jun 2026
Product report long-stop
For managers that began before 28 February 2025.
2 Dec 2026
Entity report — other managers ≥ £5bn
ESG 5.4.3R(2)(b).

Source: FCA Handbook ESG 5.4

What changed on 25 September 2026

A new carve-out in the naming rules

The FCA amended ESG 4.3 on 25 September 2026, when FCA 2026/59 came into force (Handbook Notice 144).

The instrument followed the FCA’s review of product-level TCFD reporting and replaced it, for retail products, with a duty in ESG 2.3.1BR to include identified climate-related risks in communications about a product’s risk and return.

Alongside it, ESG 4.3.2R(3)(c) now lets a manager use the restricted terms to meet ESG 2.3.1BR, including where the disclosure sits in a financial promotion.

The anti-greenwashing rule in ESG 4.3.1R was not changed.

Portfolio management

Portfolio management is not in scope

In CP24/8 the FCA proposed extending the labelling and disclosure rules to portfolio management.

In February 2025 it said it no longer intended to publish a Policy Statement in the second quarter of 2025, and later that it had decided it was not the right time to finalise rules on extending SDR to portfolio management.

No new date has been set, so the accurate word is “not finalised”, not “delayed”.

A manager running segregated mandates for institutional clients — including pension scheme portfolios — is outside the labelling and product-disclosure rules on this page.

It is not outside the FCA’s sustainability rules altogether: the anti-greenwashing rule binds a portfolio manager as it binds every other authorised firm.

The portfolio data those mandates need is the same data behind the financed emissions figures a manager reports.

Live rules, not proposals

Everything on this page is a rule in force in the FCA Handbook.

For the family’s fuller explainer of SDR and anti-greenwashing, including enforcement, see FCA SDR and anti-greenwashing on the UK SRS hub.

CP24/8

Proposed extending SDR to portfolio management, April 2024

FCA

Not finalised

The FCA’s own word for the outcome

FCA, CP24/8 page

Frequently asked

Questions people ask

What are the four FCA SDR investment labels?

Sustainability Focus, Sustainability Improvers, Sustainability Impact and Sustainability Mixed Goals. Each requires an explicit sustainability objective and at least 70% of a product’s assets invested in line with it, plus a label-specific test. The rule is drafted as a prohibition: a firm must not use a label unless it qualifies.

What is the Sustainability Focus label?

A label for a product whose assets are environmentally or socially sustainable, judged against a robust, evidence-based standard that is an absolute measure of sustainability (ESG 4.2.13R).

What is the Sustainability Improvers label?

A label for a product investing in assets that have the potential to improve their environmental or social sustainability over time, with a stated timescale and short- and medium-term targets (ESG 4.2.14R–4.2.15R).

What is the Sustainability Impact label?

A label for a product that aims to achieve a pre-defined, positive, measurable environmental or social impact, supported by a theory of change (ESG 4.2.16R–4.2.17R). Only an Impact-labelled product may use the word “impact” in its name.

What is the Sustainability Mixed Goals label?

A label for a product that invests in line with two or more of the other three labels’ objectives (ESG 4.2.18R–4.2.19R). A Mixed Goals product must not use “impact” in its name.

Is using an SDR label mandatory?

No. Adopting a label is voluntary. But the rule in ESG 4.1.1R(1) prohibits every firm from using the label names, so a manager that uses one without meeting the ESG 4.2 criteria breaches a prohibition, not merely a marketing standard.

Does the FCA approve a fund’s sustainability label?

No. A manager notifies the FCA through its online system (ESG 4.1.7R). There is no approval step, and ESG 4.1.5R(2) forbids a manager from claiming or implying that the FCA has conferred, approved or endorsed a label.

Who can use an SDR label?

Only a manager of an in-scope product: 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 AIFM (ESG 3.1.2R). The labels are for UK UCITS and UK AIFs.

Does SDR apply to segregated portfolio management?

Not the labelling, naming and disclosure rules. The FCA consulted on extending them to portfolio management in CP24/8, and in 2025 said it had decided it was not the right time to finalise those rules. The anti-greenwashing rule applies to portfolio managers regardless, as it applies to every FCA-authorised firm.

When must a manager publish its SDR reports?

A product-level report is due within 16 months of first using a label or a restricted sustainability term. A separate entity-level report is due by 2 December 2025 for a manager meeting the enhanced SM&CR test and by 2 December 2026 for other managers with £5bn or more in assets under management on a three-year rolling average; below £5bn a manager is exempt from it.

Sources

Primary sources

Every figure, date and status on this page traces to the instrument’s owner. Secondary commentary is never the source for a number.

Financial Conduct Authority
FCA Handbook ESG 4.1 — sustainability labels (ESG 4.1.1R, 4.1.5R, 4.1.7R, 4.1.11R)
The prohibition, the carve-out from 31 July 2024, notification and the 12-month review; read live 20 August 2026.
Financial Conduct Authority
FCA Handbook ESG 4.2 — general and specific label criteria (ESG 4.2.4R–4.2.19R)
The 70% test, the absolute-measure standard, and each label’s own test.
Financial Conduct Authority
FCA Handbook ESG 4.3 — naming and marketing (as at 20 August 2026)
The thirteen restricted terms and the “impact” restriction for labelled funds.
Financial Conduct Authority
FCA Handbook ESG 4.3 — as amended 25 September 2026
ESG 4.3.2R(3)(c): the terms may be used to meet ESG 2.3.1BR climate-risk disclosure.
Financial Conduct Authority
FCA Handbook ESG 3.1 — application (ESG 3.1.2R, 3.1.3R)
Who may use labels; the £5bn entity-report exemption.
Financial Conduct Authority
FCA Handbook ESG 5.2 — consumer-facing disclosure (ESG 5.2.6R)
No more than two pages of A4.
Financial Conduct Authority
FCA Handbook ESG 5.4 — timing of SDR reports (ESG 5.4.2R, 5.4.3R)
Product reports within 16 months; entity reports by 2 December 2025 or 2 December 2026.
Financial Conduct Authority
PS23/16 — Sustainability Disclosure Requirements (SDR) and investment labels
The November 2023 policy statement that made the regime.
Financial Conduct Authority
PS23/16 (PDF), Chapters 5–8 and Appendix 1
The FCA’s reasoning and the made rules.
Financial Conduct Authority
Sustainability Disclosure Requirements (SDR) regime
Further examples of good and poor practice for labels, February 2026; Handbook Notice 136 amendments.
Financial Conduct Authority
CP24/8 — Extending the SDR regime to portfolio management
“It is not the right time to finalise rules on extending SDR to portfolio management.”
Financial Conduct Authority
Handbook Notice 144 (September 2026)
FCA 2026/59, in force 25 September 2026, amending ESG 4.3 and 5.4 among others.
Financial Conduct Authority
FCA Handbook ESG 2.3 — product-level climate reporting (ESG 2.3.1BR)
The climate-risk duty ESG 4.3.2R(3)(c) now accommodates.
Financial Conduct Authority
CP26/5 — listed issuers’ sustainability disclosures
The separate listing-rules proposal for UK SRS.
Financial Conduct Authority
PS26/19 — final UK SRS rules for listed issuers (30 September 2026)
Comply-or-explain UK SRS; a different regime from SDR.