{"id":2030,"date":"2024-08-20T14:57:10","date_gmt":"2024-08-20T14:57:10","guid":{"rendered":"https:\/\/www.effectacompliance.com\/?p=2030"},"modified":"2024-08-20T14:57:10","modified_gmt":"2024-08-20T14:57:10","slug":"sustainability-disclosure-sdr-and-labelling-regime","status":"publish","type":"post","link":"https:\/\/www.effectacompliance.com\/sustainability-disclosure-sdr-and-labelling-regime\/","title":{"rendered":"Sustainability Disclosure (SDR) And Labelling Regime"},"content":{"rendered":"<h3><strong>Background<\/strong><\/h3>\n<p>After an extended consultation period with input from several authorised companies, the Financial Conduct Authority (\u201cFCA\u201d) have published a series of measures to enhance the transparency of sustainable investment products and services, while simultaneously tackling greenwashing.<\/p>\n<p>The rules and guidance issued by the FCA are as follows:<\/p>\n<ul>\n<li>An <strong>anti-greenwashing rule &#8211;<\/strong> which applies to <strong>all FCA-authorised companies <\/strong>that claim sustainability references (be it environmental and\/or social) to their products and\/or services.<\/li>\n<li>Disclosure and naming, and marketing rules re <strong>Investment Labels<\/strong>. These rules will be applicable to <strong>UK Asset Managers.<\/strong><\/li>\n<li>Targeted rules applicable to <strong>distributors<\/strong> of investment products to <strong>retail investors<\/strong> within the UK.<\/li>\n<\/ul>\n<h3><strong>Timeframe<a href=\"#_ftn1\" name=\"_ftnref1\">\u00b9<\/a><\/strong><\/h3>\n<p class=\"p1\">31\/05\/2024\u00a0 Anti-Greenwashing comes into effect<\/p>\n<p class=\"p1\">31\/07\/2024\u00a0 Firms may begin to use labels alongside accompanying disclosures<\/p>\n<p class=\"p1\">02\/12\/2024\u00a0 Naming and Marketing rules come into force<\/p>\n<p class=\"p1\">02\/12\/2025\u00a0 Ongoing product-level and entity-level disclosures due for firms with Assets Under Management (AUM) greater than or equal to \u00a350billion<\/p>\n<p class=\"p1\">02\/12\/2026 \u00a0Entity-level disclosures due for firms with AUM greater than or equal to \u00a35billion<\/p>\n<h3><strong>Anti-Greenwashing Rule<\/strong><\/h3>\n<p>This rule took effect on 31\/05\/24. It states that any firm declaring sustainability regarding any of their products or services must do so in a manner that is<strong> \u2018Fair, Clear and Not Misleading\u2019 <\/strong>while also being proportionate to the sustainability profile of the product and\/or service advertised.<\/p>\n<p>All sustainability claims made by firms are expected to be:<\/p>\n<p><strong>Correct and easily substantiated<\/strong><\/p>\n<p>Example: If a firm declares that an investment fund is \u2018Fossil Fuel Free\u2019, but then in its terms and conditions the fund actually includes investments in companies associated with fossil fuels in any way, shape or form, even if the revenue earned from these activities is beneath a certain threshold, then this fund<strong> cannot <\/strong>be promoted as \u2018Fossil Free\u2019 as it is <strong>not factually accurate<\/strong> and <strong>cannot be substantiated.<\/strong><\/p>\n<p><strong>Lucid and presented in a way that can be easily Understood<\/strong><\/p>\n<p>Example: On a firm\u2019s website referencing its savings schemes, include images of a rainforest with text that reads, \u2018Sustainable Savings,\u2019 suggesting that the entirety of funds deposited in the firm\u2019s savings accounts will assist in creating positive sustainability outcomes. However, the website references a variety of other types of savings accounts available, this may lead the consumer into believing that <strong>all <\/strong>other savings accounts will provide financial assistance to sustainability. \u00a0Where in truth only the titled \u2018Green Savings Account\u2019 will, yet this has not been clearly stated by the firm, a likely conclusion is that the information provided on the title page has <strong>not been lucid or indeed presented clearly<\/strong> and is open to misinterpretation.<\/p>\n<p><strong>Transparent (ensuring no omissions of, or hidden essential information)<\/strong><\/p>\n<p>Example: A firm is promoting its bonds products, claiming that they will impact positively upon sustainability. Although this statement may be truthful, the firm omitted to declare that a portion of the firm\u2019s activities are designed to facilitate the improvement of efficiency in fossil fuel production. \u00a0\u00a0This may be a typical case of crucial information being omitted.<\/p>\n<p><strong>Any comparisons to other products or services must be fair and meaningful<\/strong><\/p>\n<p>Example: A firm claims that by purchasing their investment bonds, investors will be assisting in reducing emissions, more so than buying other bond products on the market.<\/p>\n<p>However, in truth the firm has only made comparisons with other firms&#8217; products within <strong>Scope 1 Emissions <\/strong>and not with the entire range. In this instance, the firm has selected only information\/comparisons that favour their bonds and not where other companies&#8217; products would be reducing emissions to a greater extent.<\/p>\n<p>In this example, the firm\u2019s claims were <strong>not fair<\/strong> nor were the claims <strong>meaningful, <\/strong>since there was no clear intelligence forthcoming as to the differing emission scopes.<\/p>\n<h3><strong>Labelling Regime<\/strong><\/h3>\n<p>Firms can label their products and\/or services to promote them in a more lucid and easier fashion to consumers. Labelling may also assist consumers in navigating their way through numerous investment products that claim sustainability which are available on the market.<\/p>\n<p>The regulator expects to be notified by firms they wish to utilise labelling on their products, and\/or if firms make any changes or amendments to their product labels going forward. <em>Although the FCA themselves will not be approving them<\/em>.<\/p>\n<p>The FCA has introduced four categories for Investment Product Labelling, which are as follows:<\/p>\n<ol>\n<li><strong>Sustainability Focus: <\/strong>This category includes investment in assets that are already environmentally and\/or socially sustainable.<\/li>\n<li><strong>Sustainability Improvers: <\/strong>This category relates to investment in assets that target improvement in their environmental and\/or social sustainability going forward and over time. Note, these assets may not be sustainable at the current time.<\/li>\n<li><strong>Sustainability Impact: <\/strong>This category relates to investment in assets that target achieving a pre-defined positive as 3well as quantifiable environmental and\/or social impact.<\/li>\n<li><strong>Sustainability Mixed Goals: <\/strong>This category relates to investment in a combination of some or all the above.<\/li>\n<\/ol>\n<p>The FCA wholly recognises the part distributors may be involved in sustainability linked information communicated to consumers along the investment chain.<\/p>\n<p>Therefore, the FCA expects such distributors to:<\/p>\n<ol>\n<li>Communicate the labels to retail investors and present the requisite consumer-facing disclosures.<\/li>\n<li>Ensure the labels and disclosures are kept up to date by communicating any changes or amendments made by the fund manager.<\/li>\n<li>Communicate clearly that any non-UK funds promoted, are not subject to the SDR and Investment Labelling regime.<\/li>\n<\/ol>\n<p>The full FCA statement can be found on their website PS23\/16<\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> These requirements are not enforceable until<strong> 02\/12\/24<\/strong> for firms that are subject to the naming and marketing rules for Asset Managers.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Background After an extended consultation period with input from several authorised companies, the Financial Conduct Authority (\u201cFCA\u201d) have published a series of measures to enhance the transparency of sustainable investment products and services, while simultaneously tackling greenwashing. The rules and guidance issued by the FCA are as follows: An anti-greenwashing rule &#8211; which applies to<a class=\"excerpt-read-more\" href=\"https:\/\/www.effectacompliance.com\/sustainability-disclosure-sdr-and-labelling-regime\/\" title=\"ReadSustainability Disclosure (SDR) And Labelling Regime\">&#8230; Read more &raquo;<\/a><\/p>\n","protected":false},"author":4,"featured_media":2043,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2030","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/posts\/2030","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/comments?post=2030"}],"version-history":[{"count":10,"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/posts\/2030\/revisions"}],"predecessor-version":[{"id":2032,"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/posts\/2030\/revisions\/2032"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/media\/2043"}],"wp:attachment":[{"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/media?parent=2030"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/categories?post=2030"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.effectacompliance.com\/wp-json\/wp\/v2\/tags?post=2030"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}