UK Sustainability Disclosure Requirements (UK SDR)
Explore what the UK SDR regulation means for you and your clients, and leverage the competitive advantage of compliance
The UK SDR Explained
The UK Sustainability Disclosure Requirements is a UK-specific regulation set out by the Financial Conduct Authority’s Sustainability Disclosure Requirements and Investment Labels Policy Statement. The regulation is comprised of three key ESG and sustainable investing objectives:
Sustainability labels
Product- and entity-level disclosures
Anti-greenwashing rules
What does the UK SDR Do?
The SDR regulation aims to improve sustainable investing in the UK by introducing four new sustainable investing labels, as outlined in the FCA’s UK SDR policy statement: Sustainability Focus™, Sustainability Improvers™, Sustainability Impact™, and Sustainability Mixed Goals™.
With these four new labels, UK-domiciled funds will fall under one of three categories: sustainability-labelled funds, non-labelled ESG funds, or non-ESG funds.
The anti-greenwashing rule requires authorised firms who make sustainability-related claims about their products to substantiate them. This will prevent consumers from being misled about the ESG credentials of their investment products.
Who does the UK SDR Impact?
The FCA’s policy states that the regulation will apply to:
1. UK firms that manage investment funds.
2.UK firms that distribute investment products to UK-domiciled retail investors.
3. FCA-authorised firms (domiciled in the UK) that make sustainability claims in their marketing about their products and services (anti-greenwashing rule).
While this regulation is UK-specific, guidance on overseas funds domiciled in the European Union is expected later in 2024. A recent SFDR consultation discussed whether Article 8 & 9 funds should have clearer and stricter labels, in line with the UK SDR.
Research
At the end of 2023, the UK's FCA unveiled its long-awaited Sustainability Disclosure Requirements and investment labels regime for investment products. The UK SDR policy statement includes a package of measures aimed at improving the trust in, and transparency of, sustainable investment products and minimising greenwashing.
Learn more about the four labels "Sustainability Focus", "Sustainability Mixed Goals", "Sustainability Improvers", and "Sustainability Impact”, and early insights into what the landscape of UK sustainability-labelled funds may look like.
Our analysis is based on conversations with a selection of asset managers and our data and knowledge of the UK fund market.
How Morningstar Can Help
Our suite of ESG data and solutions is designed to empower you with unparalleled insights and expertise, making it easier to align with the UK SDR.
For Product Manufacturers
- Quality ESG Data: Access consistent and reliable ESG data at both company and fund levels, essential for creating credible sustainable products.
- Expert Guidance: Leverage our world-leading expertise in selecting the right KPIs to meet labelling requirements.
- Customisable Reporting: Flexibly adapt to evolving reporting needs at both product and entity levels.
- Stewardship Support: Evaluate products for greenwashing risks and support your stewardship efforts with confidence.
For Product Distributors
- Market-Compliant SDR Data: Gain access to comprehensive UK SDR labels and consumer-facing documents, as well as product-level documents once they become available.
- Extensive ESG Data: Utilise our broad ESG data at company and fund levels to ensure quality and consistency in performance assessments across both labelled and non-labelled products.
- Greenwashing Prevention: Benefit from Morningstar's independent analysis to review your product lineup and assess sustainability, ensuring alignment with your stated intentions.
Explore More Resources
Report
U.K. Sustainability Disclosure Requirements: An early analysis
Explore why SDRs are important for asset managers, and the benefits of using the four labels with other fund data.
Blog
UK SDR Has Finally Landed. Where Now For ESG?
Will the UK SDR drive capital into sustainable investments or create a best-in-class classification system?
Blog
Q&A: What Are the Sustainability Disclosure Requirements?
Your questions answered. Get key insights into the UK SDR and learn how to respond to the new regulations.
Resources
EU Sustainable Finance Action Plan
Learn about the rules and regulations alongside resources and solutions to meet your compliance obligations.
Research
ESMA's Guidelines on ESG Fund Names
Explore ESMA's new guidelines on fund names using ESG and sustainability-related terms.