Professional fund buyers and product providers will have to materially alter their approach to marketing and portfolio disclosure as a result of the UK’s new Sustainable Disclosure Regime, according to a range of industry sources.
The rules, which were created as an alternative to the EU’s Sustainable Fund Disclosure Rules, and are an attempt, according to Elston Consulting's ESG specialist Andrea Acimovic, to "eliminate greenwashing".
She said fund buyers will have to document the fund providers SDR reporting and be able to explain this to clients.
Meanwhile Mark Foster, an investment manager at Parmenion, said the new rules would make providers "more accountable", but wouldn't "eliminate the need for fund buyers to deep dive into individual funds".
Acimovic added: "SDR will reshape how fund providers operate. Compliance entails a significant overhaul, demanding comprehensive disclosures, continuous reporting, and precise marketing of sustainable investment products."
This will mean fund houses will also need to create detailed consumer-facing disclosures, maintain ongoing sustainability reports, and provide entity-level disclosures, all aligned meticulously with the SDR framework.
She said: "Implementing these regulations will require considerable initial and ongoing investments in updated systems, processes, and staff training. All of this sets and additional layer of considerations both in the development and selection of funds for use in client portfolios.
"For example, effective communication is critical. DFMs will need to articulate the benefits of sustainable investments and explain the implications of these regulations clearly to end-clients. Additionally, staying on top of rules, guidance and consultations is key as the regulatory landscape continues to evolve.”
The next phase of the regulatory framework in the UK will deal with the labelling of model portfolios, something which is not dealt with by the current regulations.
The Financial Conduct Authority will shortly launch a consultation on this issue.
