FCA pauses ESG labelling rules for portfolios

The Financial Conduct Authority (FCA) has announced a pause in finalising its proposed extension of the Sustainability Disclosure Requirements (SDR) and investment labels regime to portfolio management. This decision follows constructive engagement with stakeholders and recognises the need for further consideration of practical challenges facing firms.

The regulator had originally consulted on this extension in its February 2024 paper, building on earlier discussions set out in CP22/20. The proposal aimed to bring portfolio managers in line with fund managers by introducing consistent sustainability labels and disclosure rules. The FCA hoped this would give consumers greater confidence and clarity when investing sustainably - particularly those using portfolio services, such as model or bespoke portfolios. 

While there was broad support for the idea, many respondents called for additional clarity and more time to implement the changes. Concerns were raised over how the rules would apply to bespoke portfolios, agent-as-client models, and the interaction with other ongoing regulatory initiatives, including the Overseas Funds Regime. 

Portfolio managers also questioned how labelling criteria and marketing rules would work in practice given their different roles, responsibilities, and service models compared to fund managers. On disclosures, firms welcomed the tiered approach but asked for clearer guidance on how it would interact with other sustainability reporting requirements. 

In light of this feedback, the FCA confirmed that it no longer intends to publish a Policy Statement in the second quarter of 2025. Instead, the regulator will focus on its upcoming multi-firm review of model portfolio services. This broader review, set out in its recent Asset Management and Alternatives portfolio letter, will assess how well firms are applying the Consumer Duty to deliver good outcomes for investors. 

While final rules for portfolio managers are on hold, the FCA reminded firms that the anti-greenwashing rule came into effect on 31 May 2024. This requires that sustainability-related claims be fair, clear and not misleading, regardless of whether a firm is yet subject to SDR. 

As part of our ongoing investment services at The Private Office, we offer clients a selection of risk-adjusted portfolios, across a broad range of investment styles, including a sustainable range. For those with unique investment preferences or requirements which dictate the need to construct an individual portfolio, we can provide bespoke portfolios, subject to suitability. For more information about our ongoing services, please visit our services page or get in touch with your usual TPO Adviser. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The information in this article is correct as of 28/05/2025.