On 27 February 2026, the Financial Conduct Authority (FCA) published a new webpage, outlining its findings in relation to good and poor practice for using labels under the Sustainability Disclosure Requirements (SDR) regime.

Background

The FCA explains that firms in scope have been able to use sustainability labels under the SDR regime since July 2024 and that the examples it sets out here are intended to help firms prepare pre-contractual disclosures for use of labels, following the pre-contractual disclosure examples it published previously.

Summary of findings

The FCA set out the following examples of good and poor practice in relation to each of the sustainability labels, in particular:

• Sustainability Focus:
  • Good practice – it is clear that the objective is to invest in assets that are environmentally or socially sustainable; the disclosures outline potential negative outcomes from this investment approach; there is a scoring system that classifies assets as sustainable if they score 7 out of 10 which includes a description of the criteria that assets would need to meet or attributes that they would need to have to get that score; and, where a fund has a sustainability objective to invest in products/services across several themes, it uses KPIs that show how the fund is invested across those themes.
  • Poor practice – the objective is not clear, specific and measurable; a company is selected based on some sustainable attributes without considering the complete picture; the standard of sustainability is not backed by evidence; the firm claims that 100% of the company’s revenues is derived from sustainability products/services but cannot substantiate that claim.

• Sustainability improvers:
  • Good practice – the disclosure sets out how the firm intends to measure an outcome in relation to an objective; the firm decides which assets have the potential to meet the standard based on disclosures, clear strategies, and transition plans; KPIs show decarbonisation where the fund’s sustainability objective is to invest in assets with the potential to decarbonise.
  • Poor practice – a fund has a climate-related objective that is only based on reducing Scope 1 and 2 emissions, but gives the impression that the aim is to reduce ‘all’ emissions (including Scope 3); the firm assumes that assets will set decarbonisation targets, without any robust evidence to support this; firms continue to engage with companies that aren’t making progress towards the objective, with no timeframe for them to respond to the engagement, or next steps if they don’t.

• Sustainability impact:
  • Good practice – the outcomes are clear in each of the areas of intended impact; a fund’s assets aim to provide the general population with access to education and the firm clearly sets out what change it expects, the firm does not clarify what change it expects by investing the relevant assets or why.
  • Poor practice – the fund seeks broad or unmeasurable impacts; the KPIs are not consistent with the objective and theory of change. 

• Sustainability mixed goals:
  • Poor practice – the fund intends to invest in assets that focus on sustainability (Focus) or have the potential to improve over time (Improvers); however, all assets have Improvers’ attributes, and it is not clear which assets already meet a standard of sustainability and are therefore considered Focus.