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The Financial Conduct Authority (FCA) has announced it will offer firms "temporary flexibility" in meeting the Sustainability Disclosure Requirements (SDR) naming and marketing rules, pushing the compliance deadline to April 2, 2025, from the original date in December.
After discussions with firms and trade bodies, the FCA acknowledged that many companies have found it more challenging than anticipated to implement the required changes in time for the December deadline. While the regulator noted a "strong pipeline" of fund applications seeking to use one of the four SDR labels, only six products have submitted formal applications.
Only WHEB Asset Management and AEW have publicly disclosed that they were approved to use the Sustainability Impact label. In contrast, Premier Miton Global Renewables and Impact Healthcare REIT have announced they will remove sustainability-related language from their names or investment objectives.
In light of the significance of getting SDR suitable for investors, the FCA emphasized a "pragmatic and outcomes-based" approach, giving firms additional time to implement the necessary changes. The extension pushes the deadline to 5 p.m. on April 2, 2025, but firms must submit their updated disclosures by 5 p.m. on October 1, 2024, to qualify for the extension.
This extension is only available to firms using terms like 'sustainable,' 'sustainability,' or 'impact' in their fund names and intending to apply for an SDR label or change the fund's name. The FCA stressed that firms capable of complying with the original December deadline should still aim to do so, and those seeking the extension are encouraged to comply earlier if possible.
The FCA clarified that funds using other sustainability-related terms will not be eligible for the extension. Additionally, the regulator said it would take a "supportive, proportionate, and outcomes-based" stance with firms undergoing mergers, wind-ups, or terminations before the December deadline.
Chris Cummings, chief executive of the Investment Association, said: "We are pleased that the FCA has listened to industry and granted investment management firms additional time to comply with the SDR investment labelling rules. Our industry has been working hard and at pace to implement the SDR requirements, which will raise standards and improve confidence for investors in the market for sustainable investments.
"Today's announcement will provide firms seeking to apply labels to funds with the much-needed additional time to work together with the regulator to comply with the new regulation. We will continue to work constructively with the FCA and support our members to meet these deadlines, noting the more limited extension for firms complying with the 'naming and marketing' rules."
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