FCA SDR and Investment Labels: What UK Wealth Advisers Need to Know

The FCA’s anti-greenwashing rule has been in force for nearly two years. Investment labels have been live since July 2024. Naming and marketing restrictions started biting in December 2024. And yet a surprising number of UK wealth firms still treat the Sustainability Disclosure Requirements as someone else’s problem.

It is not. SDR is the most consequential change to how regulated firms talk about sustainability since MiFID II added ESG preferences to suitability. If you advise HNW clients, every fund factsheet you put in front of them, every report you produce, and every line you write about a portfolio’s sustainability characteristics now sits inside this regime.

This piece sets out what the rules actually require, where the boundaries sit for advisers as opposed to manufacturers, and what your practice should be doing about it now.

What SDR is, in one paragraph

The Sustainability Disclosure Requirements and investment labels regime is set out in FCA Policy Statement PS23/16, finalised in November 2023. It bundles four things into a single regime: a general anti-greenwashing rule that applies to every FCA-authorised firm, four voluntary investment labels for funds that meet specific sustainability criteria, restrictions on the use of sustainability-related terms in fund names and marketing, and a layered disclosure framework covering consumer-facing summaries, detailed pre-contractual information, and ongoing product and entity reporting.

The labels are voluntary. The rest is not.

The rollout, and where we are now

The regime did not land in a single day. The phasing matters because it tells you which obligations are already biting and which are still being layered in.

The anti-greenwashing rule (FCA Handbook ESG 4.3.1R) applies to every FCA-authorised firm in respect of any communication of a financial product or service. There is no carve-out for advisers, no de minimis, no transition period left to run. The FCA’s Finalised Guidance FG24/3 sets out what fair, clear, and not misleading actually means when sustainability claims are involved.

The four labels, and what they actually mean

The labels do most of the heavy lifting in the regime. Each one signals a different kind of sustainability strategy, and each requires at least 70 percent of the fund’s assets to be invested in line with that strategy.

Label	What it signals	Typical use case
Sustainability Focus	Invests mainly in assets that are environmentally or socially sustainable today	A fund of companies meeting a defined sustainability standard
Sustainability Improvers	Invests in assets that have the potential to improve their sustainability over time	An engagement-led strategy targeting transition
Sustainability Impact	Invests in solutions to environmental or social problems and seeks measurable positive outcomes	Often private market or thematic listed strategies
Sustainability Mixed Goals	Invests across two or more of the above categories	Multi-asset or fund-of-funds with a blended approach

Use of a label is voluntary. But the moment a fund manager applies one, they are committed to the full disclosure regime: a consumer-facing document, detailed pre-contractual disclosures, ongoing product reports, and entity-level reporting once thresholds are reached.

This matters for advisers because absence of a label is itself information. A fund that screens out tobacco and weapons but holds no label is making a deliberate commercial choice. It does not mean the fund is unsuitable for a sustainability-minded client. It does mean you cannot describe it using sustainability terminology that the regime restricts.

Naming and marketing: the trap most advisers underestimate

The naming and marketing restrictions are where adviser practice is most likely to drift into breach without anyone noticing.

Since 2 December 2024, an unlabelled UK retail fund cannot use the terms “sustainable”, “sustainability” or “impact” (or close variants) in its name or financial promotions. Other sustainability-related terms can be used, but only where the fund has characteristics that justify them, and where a disclaimer is included that the fund does not have a sustainability label.

What this means in practice for an adviser:

• A model portfolio that you label “ESG Growth” or “Sustainable Balanced” needs to stand up to scrutiny. If the underlying funds are unlabelled and the strategy does not meet a labelled fund’s threshold, the name itself can be a problem.
• Client-facing literature describing a portfolio as “sustainable” or “impact-aligned” must be supported by evidence the FCA would accept as fair, clear and not misleading.
• Marketing emails, website pages, suitability letters and review reports all sit inside the anti-greenwashing rule. Old templates that pre-date SDR are a common source of risk.

Take the position that any sustainability claim in client communications has to be backed by a specific, evidenced characteristic of the underlying holdings. If you cannot point to it, do not say it.

What advisers actually have to do

There is no SDR rulebook for advisers in the way there is for fund managers. The obligations come at you indirectly, through the anti-greenwashing rule, Consumer Duty, suitability rules, and the naming and marketing restrictions when you use sustainability language.

In practice, well-run firms are tackling five things.

1. Audit your sustainability vocabulary

Pull every piece of client-facing material that uses words like sustainable, ESG, impact, green, responsible, ethical, climate, net zero, transition, or stewardship. Marketing pages, model portfolio brochures, suitability templates, review reports, factsheets, even meeting agenda templates. For each use, can you point to evidence in the underlying holdings that justifies the claim? If not, rewrite or remove.

2. Update your fund research process

Your due diligence on funds with sustainability characteristics now needs to capture label status, the consumer-facing disclosure, the sustainability objective, and the KPIs the manager is reporting against. This is a permanent change to fund research, not a one-off cleanup. Embed it into your standard process, the same way you embed cost analysis or performance attribution. Our piece on fund due diligence for wealth advisers sets out how to structure this.

3. Tie it into Consumer Duty

The price and value, products and services, and consumer understanding outcomes all have a sustainability dimension now. If you offer a “sustainable” portfolio that costs more than your standard option, you need evidence that clients are getting the sustainability characteristics they are paying for. The work you have already done for Consumer Duty is the right framework; SDR adds a specific data layer to it.

4. Train the front office

Advisers and paraplanners need to understand the four labels well enough to explain them to clients in a meeting, and to spot when their own language strays into restricted territory. A short, scenario-based training session is more useful than a deck of slides. Test it with real fund examples and real client conversations.

5. Plan for the portfolio management extension

The original SDR rules apply to UK retail funds. The FCA consulted in 2024 on extending the regime to portfolio management, which would pull MPS, DFM mandates, and bespoke portfolios into scope. The extension has not been finalised as of April 2026, but the direction of travel is clear. Firms running their own model portfolios or relying heavily on DFM partners should be designing now for a regime that treats portfolios in much the same way as funds.

The HNW context

For HNW clients, sustainability sits in an awkward space. Many want their wealth managed in a way that reflects their values. Few want to give up returns or accept concentration risk to get there. And almost all of them have heard enough about greenwashing to be sceptical of vague claims.

SDR is, in that sense, useful. It gives you a framework to have a more honest conversation. You can show a client the difference between a Sustainability Focus fund, a Sustainability Improvers fund, and an unlabelled fund with strong stewardship credentials, and let them choose with their eyes open. That is a better conversation than the one most advisers were having three years ago. Our analysis of ESG investing for HNW clients covers how to frame these trade-offs without overpromising.

For broader context on where the regime fits in the UK government’s sustainable finance agenda, the Treasury’s SDR implementation update is a useful read, alongside the FCA’s climate change and sustainable finance hub.

What good looks like in 2026

A firm that has SDR sorted has a documented sustainability vocabulary policy, a fund research template that captures label status and disclosures, model portfolio names that survive a fair-clear-not-misleading test, suitability templates that handle labelled and unlabelled funds without ambiguity, and a training record that shows the front office can speak fluently about the four labels.

That is not a heroic ask. It is a quarter of project work for most mid-sized firms, and it removes a real, current source of regulatory risk.

The firms that have not done this work are still relying on pre-SDR templates and habits. Some will get lucky. Others will end up explaining to the FCA, or a Financial Ombudsman Service complainant, why a portfolio brochure described a strategy as “sustainable” when the underlying funds carried no label and the evidence would not support the claim.

If you are not sure where your practice sits, the audit in step one is a low-cost place to start. Pull the materials, mark them up against the anti-greenwashing rule, and decide what to fix this quarter. The regime is not going to relax. The HNW client base is only going to ask sharper questions. The work is worth doing properly.