Extending the SDR regime to Portfolio Management: Getting Ahead of the Curve.

With the Financial Conduct Authority (FCA) set to release its policy paper on the Sustainability Disclosure Requirements (SDR) for portfolio managers in Q2 2025, now is the time to prepare. At our latest count, 39 funds have been awarded labels so far and it’s reported that 59 are also in the pipeline. While SDR has already transformed practices for fund managers, its extension to portfolio management services signals further change across the investment industry.?

We recently shared our thoughts on this topic in an article for PIMFA’s latest journal- Raising the Bar on Sustainable Funds- exploring what SDR means for portfolio managed services. You can read it here:? PIMFA Journal Edition #29?

For portfolio managers, SDR is more than a regulatory challenge—it’s a chance to demonstrate leadership, meet evolving investor expectations, and build greater trust and transparency in sustainable investing.?

Getting Ahead: Practical Steps for Portfolio Managers?

In both the PIMFA article and our client work, we’ve identified several key steps for portfolio managers to prepare for SDR:?

• Conduct a Gap Analysis: Review current practices, products, and disclosures to identify areas needing significant improvement.?

• Evaluate Portfolio Alignment: Determine if existing offerings meet SDR criteria and address the impact of naming and marketing rules.?

• Build Internal Expertise: Ensure teams have the knowledge and resources to deliver robust sustainability assessments and evidence-based reporting.?

• Secure Reliable Data: Partner with credible data providers and critically evaluate their methodologies to validate sustainability claims.?

• Integrate the Golden Thread: Link portfolio objectives, KPIs, and stewardship activities for a seamless alignment with SDR’s requirements.?

Why Act Now??

The FCA’s message is clear: there’s no time to “wait and see.” The first round of SDR labelling has proven more challenging and time consuming than some anticipated, especially for those that have traditionally relied on marketing flexibility or softer interpretations of sustainability.??

Although some details of SDR for portfolio management services remain uncertain, it is clear that SDR will require providers to strengthen accountability by ensuring sustainability claims are accurate and backed by credible evidence, and to redesign portfolios to align investments with measurable sustainability goals.?

Even if managers choose not to pursue a label, they still need to consider the impact of the naming and marketing rules which may require some redesign.? However, SDR is more than a compliance burden; it’s a transformative opportunity. Firms that rise to SDR’s standards will stand out as credible and reliable in the increasingly crowded sustainable investing landscape.?

Dive Deeper: Key Takeaways from the PIMFA Article?

In the PIMFA article, we delve into the specifics of how portfolio managers can adapt to SDR, including the importance of:?

• Avoiding greenwashing with clear, evidence-based standards.?

• Conducting independent assessments to validate sustainability claims.?

• Communicating sustainability effectively with clients and advisers through simple, accessible language.?

Looking Ahead?

SDR offers portfolio managers an opportunity to lead the way in sustainable investing, transforming compliance into a competitive advantage. By preparing now, firms can not only meet regulatory expectations but also build resilience, credibility, and trust.?

Don’t wait to get started—explore the opportunities and challenges in detail in the PIMFA journal article: PIMFA Journal Edition #29?