Overview
From 2 December 2026, the FCA's Sustainability Disclosure Requirements (SDR) sustainability entity-reporting rules extend to a wider cohort of in-scope UK asset managers above the £5 billion AUM threshold. This is set out in ESG 5.6 of the FCA Handbook and sits alongside and deliberately uses the structure of the entity-level reporting framework required under the Task Force on Climate-related Financial Disclosures (TCFD), set out in ESG 2.2.
The sustainability entity report uses the same four TCFD pillars (governance, strategy, risk management, and metrics and targets), but broadens the focus beyond climate to wider sustainability-related risks and opportunities (e.g. biodiversity and human rights). For most managers, this should not require a wholly new reporting process.
This note covers what’s involved in completing an SDR sustainability entity report, and how to use existing TCFD disclosure information to deliver an SDR compliant report without too much drama.
What is the sustainability entity report and who’s in scope?
The SDR are not a single reporting requirement but a package of rules covering sustainability-related products, disclosures and marketing.
For asset managers, the most relevant elements of SDR are shown in the table below. This note focuses primarily on the sustainability entity report.
| Requirement | What it does | Who it applies to | Key dates |
|---|---|---|---|
| Anti-greenwashing rule | Requires sustainability claims about financial products and services to be fair, clear and not misleading. | FCA-authorised firms communicating sustainability characteristics of products or services | In force from 31 May 2024. |
| Product disclosures | Provide investors with information about products using sustainability labels or sustainability-related terminology. | In-scope retail products using an FCA sustainability label or sustainbility-related terms. | Already in force and ongoing. |
| Sustainability entity report | Explains how the manager identifies and manages material sustainability-related risks and opportunities across its business. | In-scope UK asset managers above the applicable £5 billion AUM threshold, calculated using the relevant three-year rolling average. | 2 December 2025 for the first cohort (>£50bn AUM) and 2 December 2026 for the wider cohort above £5bn AUM. Note that the Sustainability Entity Level Report is required for in scope managers, even if the manager has not adopted SDR product labels. |
How SDR builds on TCFD
The sustainability entity report sits alongside existing TCFD reporting rather than replacing it and much of the existing reporting can be reused. Managers with an existing TCFD report should therefore use that as their starting point.
The main areas that are likely to require additional work include:
Broader scope, not just climate
SDR broadens the focus beyond climate. Managers may need to consider other sustainability topics that are material to the business, such as biodiversity, human rights, labour practices and governance issues. The FCA points firms to the SASB Standards, IFRS S1, and GRI as a useful reference for identifying financially material topics.
An optional impact lens
The FCA also encourages managers to consider their impacts on people and the environment, having regard to the GRI Standards. This introduces an impact perspective alongside the assessment of sustainability-related risks and opportunities, but it does not create a blanket requirement to undertake a formal double-materiality assessment. The FCA frames this as something managers “should consider”, rather than a mandatory “must” requirement.
New disclosures for labelled products
Where a product carries an FCA sustainability label* or sustainability-related term**, firms must additionally describe the resources and governance behind it, and their diligence process for third-party ESG data and ratings providers. There's no TCFD equivalent to this but it also only applies to managers who are using an FCA label.
IFRS S1 as a reference, not a requirement
Finally and perhaps less pressing, the FCA recommends using IFRS S1 to inform the content of the sustainability entity report. While this is not currently a mandatory requirement, it potentially signals the regulator’s intentions in moving towards alignment with the ISSB standards and reporting framework.
Where to start?
For most firms, the easiest approach is to build from the existing TCFD reporting process rather than create a new one. The following steps set out the approach.
Confirm scope: identify the reporting entity, sustainability in-scope business, AUM and reporting deadline.
Map product obligation: identify any labels, sustainability-related terms and product disclosure requirements.
Reuse TCFD: map the latest TCFD report against ESG 5.6 requirements.
Agree material topics: identify material sustainability risks and opportunities using the SASB Standards, IFRS S1 guidance, and GRI Standards and document the rationale.
Build the evidence base: record sources, methodologies, controls and limitations for each disclosure.
Draft and reconcile: draft the report, explain any material differences across products, strategies or asset classes, and check consistency with product disclosures and marketing.
Challenge and sign off: involve compliance and the accountable senior manager early.
*FCA Sustainability Investment Labels include four voluntary labels (Sustainability Focus, Improvers, Impact, Mixed Goals) a fund can adopt if it meets the FCA's qualifying criteria. Sustainability Disclosure Requirements (SDR) regime | FCA
**FCA defined sustainability terms include: ESG (or "environmental, social and governance"), environment / environmental / environmentally, social / socially, climate, sustainable / sustainability, green, transition, net zero, impact, responsible, sustainable development goals / SDG(s), Paris-aligned, plus a catch-all: "any other term which implies that a sustainability product has sustainability characteristics" FCA Handbook - ESG 4.3 Naming and marketing
If you’d like more information or help complying with SDR, please get in touch.
Further Reading
