Sustainability Disclosure Requirements
From the 2nd December 2024, the naming and marketing rules come into force. Distributors (Platforms/Advisers) need to communicate the labels and provide access to consumer-facing disclosure. This is either from a relevant digital medium for the product or using the channel they would normally use for communication with clients.
We acknowledge our position in the value chain and have decided to provide an update to advisers to assist them with the distributor’s requirements. We will highlight the funds in scope for the portfolios that have sustainability-related references.
The Four New SDR Labels
From 31 July 2024, UK-domiciled funds have been able to adopt one of four new sustainability labels:
- Sustainability Focus
- Sustainability Improvers
- Sustainability Impact
- Sustainability Mixed Goals
These 4 labels are to help clients identify the sustainability approach of funds who want to adopt one of the labels. We have observed that it’s a high bar to get one of these labels and is going to take up until next year (April 2nd 2025) until there is more of a clear picture of the marketplace. Below is some more information on the specifics of each label.
You will observe the images below on funds which adopt one of the new labels. This will be on the 2-page consumer-facing information document.
The Label Descriptions from the FCA
Sustainability Focus
These funds invest mainly in assets that focus on sustainability for people or the planet. Examples may include activities to support the production of energy, for example, from solar, wind or hydrogen.
Sustainability Improvers
These funds invest mainly in assets that focus on sustainability for people or the planet. Examples may include activities to support the production of energy, for example, from solar, wind or hydrogen.
Sustainability Impact
These funds invest mainly in solutions to sustainability problems with an aim to achieve a positive impact for people or the planet. Examples may include renewable energy generation and social housing.
Sustainability Mixed Goals
These funds invest in a mix of assets that either focus on sustainability, aim to improve their sustainability over time, or aim to achieve a positive impact for people or the planet. Examples may include a mixture of investments from the labels above.
Funds that have labels will also need to give you clear and simple information, including:
- What the sustainability goal of the fund is
- The approach to achieving it
- Annual updates on progress towards the goal
(Source of Data: FCA Website- Link Below)
Non-Labelled Funds
Further to the labels, a fund can decide not to go with a label but still make sustainability claims. Eg they may have “Green” or “Ethical” in the fund title.
We feel these funds still play a vital role within a diversified portfolio.
These funds without a label will still produce consumer-facing material, although not as in-depth as the above 4 labels. They will also have to clearly state that “This product does not have a UK sustainable investment label” and explain why they don’t have a label.
Offshore Funds
The final part of the SDR label criteria is for Offshore funds. These funds are not domiciled in the UK, so fall out of the scope of SDR. The UK Treasury is looking into how this can be more integrated going forward. In the supporting material for advisers, you will find a list of the offshore funds we use within our models with Sustainability claims.
How we will support you
Going forward IBOSS will provide fund label information for all relevant funds, as part of our quarterly update process to you and your clients. Each quarter, we will also make fund level disclosure documents available electronically to support you in making these available to clients investing in the relevant funds.
Future developments
We envisage the rules for model portfolio providers like ourselves to be published in Q2 2025 and we will keep you updated with any changes to our processes as a result of these regulatory updates.
For more information on SDR please find a link below to the FCA website.
