Sustainability Disclosure Requirements
The UK Financial Conduct Authority (FCA) plans to revise Sustainability Disclosure Requirements (SDR) to provide asset managers with more flexibility in publishing sustainability reports.
This revision comes from the 49th quarter consultation document released by the UK Financial Conduct Authority, which makes minor revisions to the Sustainability Disclosure Requirements in Chapter 5 and seeks opinions from market participants.
Related Post: UK FCA Sets Out Temporary Measures for Sustainability Disclosure Requirements
Sustainability Disclosure Requirements Revisions
The modifications to the Sustainability Disclosure Requirements are as follows:
- Index tracking fund: Change the description from selecting assets to investing in assets. The original rules believed that sustainable investment labels need to adapt to both active and passive strategies, and refer to robust, evidence-based standards to select assets. However, for passive investments such as index tracking funds, asset managers do not choose assets from them, which is determined by the characteristics of passive investment strategies. The modified passive strategy can be invested in sustainable assets to meet the rules.
- Sustainable development product report: The report does not necessarily cover a 12-month reporting period. The original rules required sustainable label users to prepare an annual product sustainability report, which must cover a 12-month reporting period, and the first report must be published within 16 months after the manager first uses the sustainable label. Regulatory authorities believe that this requirement will increase the administrative burden on managers and that consumers may receive sustainability reports for different products at different times. After modification, companies can handle information disclosure flexibly instead of covering a 12-month reporting period.
- Sustainable development product report: Does not cover the additional requirement of a 12-month reporting period. When asset managers choose a sustainability report that does not cover a 12-month reporting period, they must clearly state their reporting period in the report and provide background information to explain the reasons for choosing that reporting period. For example, in less than 12 months, managers can explain why the product has not made significant progress towards sustainable development goals. Managers need to publish reports within four months of selecting the reporting period and consider how to compare the sustainability information of the product in different reporting periods.
The UK Financial Conduct Authority believes that this amendment can ensure an appropriate level of consumer protection and promote effective competition that is in line with consumer interests, protecting them from the harm of greenwashing. This modification can also provide more flexibility for asset managers to effectively comply with Sustainability Disclosure Requirements.
Reference:
CP25/24: Quarterly Consultation Paper No. 49
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