Sustainability Disclosure Requirements (SDR) & Investment Labels


Overview (Labelled funds | Non-labelled funds | Overseas funds)


This page provides a practical overview of the UK’s Sustainability Disclosure Requirements (SDR) and investment labels.


These rules are designed to help improve how sustainability is described, communicated and understood — making it easier for clients and advisers to navigate the market and reduce the risk of greenwashing.


Important:

This page focuses on the UK SDR regime only. There are many overseas funds and strategies that may be sustainable, but they are not subject to the UK labelling system. These can still be valid and suitable investments, but they require careful due diligence and clear explanation to clients.

Why SDR matters


The SDR is not just about labels — it’s about improving:


  • clarity of communication
  • comparability between products

Under Consumer Duty, firms must ensure clients can:


  • understand what they are investing in
  • compare options meaningfully
  • make informed decisions

SDR is a key tool to support this, but it does not replace the advice process.


What SDR introduces


The regime brings together:

  • Consumer-facing disclosures
  • Detailed product and firm-level disclosures
  • An anti-greenwashing rule for all firms
  • Four investment labels (for products with clear sustainability objectives)
  • Rules for naming and marketing

All sustainability claims must be clear, fair and not misleading


The four investment labels


Funds can choose to apply a label if they meet strict criteria. Each label reflects a different approach to sustainability — there is no hierarchy.


📍Sustainability Focus. Invests mainly in assets that are already sustainable.

📍Sustainability Improvers. Invests in assets that are expected to become more sustainable over time.

📍Sustainability Impact. Invests in solutions aiming to deliver a measurable positive impact.

📍Sustainability Mixed Goals. Combines multiple approaches (Focus, Improvers and/or Impact).


Labelled funds – what they provide


Labelled funds must meet consistent standards and provide:

  • A clear sustainability objective
  • A defined investment approach
  • Metrics and KPIs to measure progress
  • A stewardship approach
  • Short, consumer-facing disclosures
  • Ongoing reporting and disclosures 

This gives advisers and clients a more structured starting point for understanding a fund.


→Key principle: At least 70% of assets must align with the sustainability objective, and the remainder must not conflict with it.


Non-labelled funds


Not all funds will have a label — and that is expected.


Some funds:

  • may not meet the label criteria
  • may choose not to apply a label
  • may be outside the UK regime (e.g. overseas funds)

If a fund uses sustainability-related terms without a label, it must:


  • clearly state that it does not have a label
  • explain why not
  • provide supporting disclosures

→In practice: Non-labelled funds still play an important role in meeting client preferences — it is important to understand how their sustainability characteristics are defined and communicated.


Currently, the majority of funds in scope of SDR do not carry a label. This reflects the fact that:

  • not all strategies are designed around a specific sustainability objective
  • some approaches (such as ethical or values-based investing) may not align directly with the label criteria
  • some managers may choose not to use a label

Non-labelled funds may still:


  • integrate sustainability characteristics and considerations
  • apply exclusions or ethical screens
  • follow stewardship or engagement-led approaches

What matters is that their approach is clearly described, understood and aligned to client preferences, rather than whether a label is present.


Overseas funds


The UK SDR regime currently applies to UK-authorised products.


This means:

  • overseas funds will not carry UK SDR labels
  • they may follow different frameworks or standards
  • they may still have credible sustainability approaches

Where overseas funds are used, firms should ensure clients understand that these products are not subject to the UK SDR labelling regime.


→The absence of a UK label does not automatically mean a fund is unsustainable — but it means the approach should be clearly understood and explained to clients.


Consumer-facing disclosures


A key feature of SDR is the introduction of short, standardised disclosures for labelled and non-labelled funds. These disclosures support better client understanding.


The anti-greenwashing rule


All FCA-authorised firms (including advice firms) must ensure sustainability claims are:

  • accurate and evidence-based
  • clear and understandable
  • complete and not misleading
  • fair in comparisons

This applies across all client communications — including:


  • websites
  • marketing
  • suitability reports

What this means in practice


SDR helps structure the market — but it does not make decisions for you or your clients.


Advisers still need to:

  • understand the different types of sustainability approaches
  • interpret labelled, non-labelled funds and overseas funds
  • align investments with client preferences
  • explain clearly and consistently

The labels provide a helpful starting point, not a shortcut.


Consumer Duty – bringing it together


SDR and Consumer Duty are closely linked.


Firms are expected to:

  • act in good faith
  • avoid foreseeable harm (including greenwashing)
  • support clients in achieving their financial objectives (including sustainability preferences) 

This means sustainability must be embedded into:

  • all conversations with investment clients 
  • client preference gathering
  • research and due diligence
  • ongoing reviews

A structured approach helps ensure:


  • consistent data capture
  • clear rationale for decisions
  • the ability to monitor and improve outcomes over time

How to use this in your process


Think of SDR as:

  • Disclosures → a communication tool
  • Labels → a navigation tool
  • Your advice process → the decision-making framework

All three are needed to deliver good client outcomes.


Next steps


Understanding SDR is one part of the journey.


To apply it effectively, firms need a structured way to:


  • identify client sustainability preferences
  • map these to suitable solutions
  • evidence and review decisions over time

→ Explore the Preference Toolkit to support this process.


Further reading: 


💡Accord Consulting offers practical and strategic support for advice firms, DFMs and fund groups. Please contact us ✉️elly@inaccord.co.uk or ✉️lee@inaccord.co.uk