The Financial Conduct Authority’s new Sustainability Disclosure Requirements (SDR) labels aim to enhance the credibility of sustainability claims in the financial sector.
- A significant proportion of financial advisers and wealth managers express increased confidence in sustainability claims due to these labels.
- According to the Association of Investment Companies (AIC), nearly two-thirds of intermediaries believe these labels bolster trust.
- The ‘Sustainability Focus’ label is leading in preference for screening investments among advisers.
- Private clients are also expected to show increased trust and engagement with sustainable investments.
The Financial Conduct Authority (FCA) has introduced new Sustainability Disclosure Requirements (SDR) labels designed to address the growing demand for transparency and reliability in sustainability claims within the financial sector. The purpose of these labels is to build trust among financial advisers and wealth managers, thereby influencing their investment decisions. According to the latest ESG Attitudes Tracker from the Association of Investment Companies (AIC), a significant portion—nearly two-thirds—of intermediaries see these labels as a positive step towards enhancing trust.
This increased trust is not uniform across all types of financial professionals. While 78% of wealth managers reported an increase in trust due to the new labels, only 55% of financial advisers shared this sentiment. This disparity suggests that wealth managers may perceive a greater benefit from the transparency that these labels provide, possibly because of their broader client base and higher levels of accountability.
Among the four labels introduced, the ‘Sustainability Focus’ label emerges as the preferred choice for screening investment opportunities, with 54% of intermediaries indicating they would utilise it for this purpose. Next in line is the ‘Sustainability Impact’ label, with 52% endorsement, followed by ‘Sustainability Improvers’ and ‘Sustainability Mixed Goals’ labels. Such preferences highlight the varied strategies employed by investment professionals when integrating sustainability into their portfolios.
Reflecting the intermediaries’ trust, nearly two-thirds of surveyed private clients indicated a willingness to increase their engagement with sustainably labelled investment options. This trend signals a potential increase in the demand for transparency and accountability in investment products not just from professionals but from clients as well. It is evident that the SDR labels are influencing both ends of the financial advisory chain, promising a shift towards a more ethically robust investment environment.
The FCA’s SDR labels are poised to elevate trust levels and reshape sustainability practices in the financial advisory sector.
