Changes and clarifications to the SDR regime

The Financial Conduct Authority (FCA) has released its latest quarterly consultation paper in which, among other proposed changes, the FCA is consulting on several minor amendments to the Sustainability Disclosure Requirements (SDR) to clarify the application of the rules to index-tracking funds and to increase the flexibility of reporting under SDR.

Index funds

Citing feedback that managers of index-tracking funds were struggling to meet the requirements for products using a sustainability label to “select” assets, the FCA is proposing to add guidance to clarify that managers of index-tracking funds can satisfy this requirement by investing in, rather than “selecting”, assets. 

Reporting

The FCA has also proposed changes enabling firms to better align the timing of sustainability product reports under SDR with other relevant reports, such as annual financial statements, product-level TCFD reports, and product-level reports of other funds. The FCA recognises that under the current framework, consumers are likely to receive sustainability product reports relating to different funds at different times, meaning comparison of progress between similar funds is more challenging. 

As proposed, firms will have the option for Part B of their product-level sustainability report to cover a shorter reporting period than 12 months, or include a period of time in which sustainability labels and terms are not used, to align with other reporting timelines.

Firms would need to meet the following conditions to exercise this option: 

• they must make clear in the report the reporting period that is being covered; 
• they must provide contextual information to explain why that reporting period was chosen; and
• they must publish the report within four months after the end of the chosen reporting period. 

Next steps

Stakeholders are encouraged to respond to these proposals within the consultation paper by 15 October 2025.

Written by Jamie Howarth