UK: FCA proposes clarifications to SDR rules

In its latest quarterly consultation (quarterly consultation paper No 49), the FCA has proposed a few helpful clarifications to the SDR rules as follows:

• Clarifying that a manager of an index-tracking fund may meet the rule on selection of assets by investing in assets that meet robust evidence based sustainability standards, as opposed to “selecting assets” (new ESG 4.2.7(G)(2)).
• Allowing flexibility for product level reports to cover a reporting period of less than 12 months, or to include a period of time during which neither a sustainability label or ESG terms were used.  This would serve to give firms greater flexibility to align their reporting of their sustainability reports with the timing of their other regulatory reports .  Where firms avail themselves of this flexibility the proposed rule requires them to clearly explain their choice with contextual information in the report (new ESG 5.4.3(1A)).
• Clarifying that firms are not required to produce an on-demand sustainability product report until at least 16 months after the first use of a label or relevant terms (amending ESG 5.5.15R)

The consultation closes on 15 October 2025