SDR Technical Support

Ensuring Compliance with Industry Regulations

SDR Technical Support

The Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR) introduce a new era for fund managers. These regulations demand a clear demonstration of sustainability impact and navigating them can be complex.

 

At The Good Economy, we provide expert SDR impact advisory services to help you confidently meet these requirements. Our comprehensive support includes:

  • SDR Assessment: A thorough five-step process encompassing discovery, alignment, gap analysis, advisory, and support, ensuring you meet all SDR obligations.
  • Specialist Expertise: In-depth guidance on meeting SDR criteria, for example, developing your Theory of Change, defining robust impact measurement and asset selection methods, and measuring investor contribution.
  • SDR Label Application Support: Maximising your chances of securing the appropriate sustainability label for your fund from the FCA.

Five Steps to Compliance

TGE has developed a comprehensive yet flexible SDR Technical Support service designed to assist fund managers achieve SDR compliance.


Discovery


Understanding the fund’s strategy

Initial meeting to discuss the fund’s strategy, scope and sustainability objectives. Relevant fund- and firm-level documentation shared with TGE.


Alignment


Agreeing the most appropriate SDR label

Review of labelling options and implications for naming, marketing and disclosures. Agree on appropriate SDR label for fund to aim for.


Gap Analysis


Identifying criteria for FCA approval

Use TGE’s SDR assessment framework to review existing fund documentation and processes against the FCA’s requirements. Identify gaps to determine the areas where changes are required to meet all relevant SDR criteria.


Advisory


Providing inputs for the fund's prospectus

Provide guidance and/or draft specific inputs to be included in the fund’s prospectus documentation to meet all relevant SDR criteria. TGE can be involved in drafting specific sections of fund documentation and/or in a reviewer capacity.


Support


Assisting with the FCA application process

Assist with the fund’s application process to the FCA. This can involve TGE joining the fund’s calls with the FCA and/or fielding the FCA’s questions on specific elements relating to the fund’s prospectus documentation.

Proven Track Record

The Good Economy has experience in successfully guiding funds through the SDR application process, including AEW UK Impact Fund’s achievement of the ‘Sustainability Impact’ label – the first fund to receive FCA approval.

Key SDR Components We Address:

  • Sustainability Objective: Crafting a clear, specific, and measurable objective that resonates with investors and avoids greenwashing.
  • Key Performance Indicators (KPIs): Defining and tracking meaningful metrics to demonstrate your fund’s sustainability impact.
  • Investor Contribution: Articulating how your fund actively contributes to sustainable outcomes.
  • Robust Standards: Employing evidence-based methods for measuring and reporting your impact.
  • Investment Policy and Strategy: Aligning your investment approach with your sustainability objectives.
  • Stewardship: Demonstrating responsible stewardship and meaningful engagement with the companies you invest in and the difference you have made.
  • Disclosure Requirements: Meeting all necessary reporting and transparency obligations.


Partner with TGE

We offer the expertise and support you need to turn SDR compliance into a strategic advantage. Contact us today to discuss your specific needs and embark on your journey towards a sustainable future.

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FAQs

The UK’s Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR) require fund managers to categorise their funds into one of four categories:

  • Sustainability Focus
  • Sustainability Improvers
  • Sustainability Impact
  • Sustainability Mixed Goals

Understanding the FCA’s SDR Labels

The SDR labels are designed to help investors understand the sustainability profile of investment products. The labels are based on a number of factors, including the fund’s investment objective, strategy, and stewardship activities.

  • Sustainability Focus
    • A Sustainability Focus fund invests in assets that are already environmentally and/or socially sustainable.
  • Sustainability Improvers
    • A Sustainability Improvers fund invests in assets that have the potential to improve environmental and/or social sustainability over time.
  • Sustainability Impact
    • A Sustainability Impact fund aims to achieve a pre-defined, positive, measurable impact in relation to an environmental and/or social outcome.
  • Sustainability Mixed Goals
    • A Sustainability Mixed Goals fund invests in accordance with two or more of the sustainability objectives listed above.

Choosing the Right Label

Fund managers need to carefully consider the SDR requirements before selecting a label for their fund. The FCA has provided detailed guidance on each label, including the criteria that funds must meet in order to qualify.

Some of the key aspects of the SDR regime that fund managers need to consider include:

  • Sustainability objective
    • This is the specific, measurable goal that an investment product aims to achieve in terms of sustainability. The objective should be clear and concise, and it should be aligned with the fund’s overall investment strategy.
  • Key Performance Indicators (KPIs)
    • KPIs are used to measure the progress of a fund towards achieving its sustainability objective. They should be quantifiable and relevant to the fund’s sustainability goals.
  • Investor contribution
    • This is the extent to which the fund’s investments are contributing to the achievement of its sustainability objective. It is important for fund managers to be able to demonstrate how their investments are making a positive impact.
  • Robust, evidence-based standard
    • This is a standard that is used to assess the sustainability of assets. The standard should be credible and transparent, and it should be based on the latest scientific evidence.
  • Investment policy and strategy
    • The fund’s investment policy and strategy must be aligned with its sustainability objective. This means that the fund’s investments should be consistent with its stated sustainability goals.
  • Stewardship
    • Stewardship activities are used to promote the sustainability of investee companies. This can include engaging with companies on environmental, social, and governance (ESG) issues.
  • Disclosure requirements
    • Fund managers must disclose certain information about their funds’ sustainability profile to investors. This includes information about the fund’s sustainability objective, KPIs, and investor contribution.

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