The Financial Conduct Authority (FCA) has delayed its plans to extend the Sustainability Disclosure Requirements (SDR) regime to portfolio management.

The regulator noted that its consultation had found broad support for the extension of SDR to portfolio management, with most respondents believing it was an important step in improving consumer outcomes.

However, it stated that it wanted to “carefully consider” the challenges and ensure that portfolio managers were able to implement the regime before introducing requirements.

The FCA had proposed applying SDR to different types of portfolio management, including model, custom, and bespoke portfolios, but highlighted the challenges identified in applying the rules to bespoke portfolios, and how the rules should apply to agent-as-client models where the adviser acts as a professional client of the portfolio manager.

It had initially proposed introducing the regime by 2 December 2024, but respondents asked for more time to make the necessary changes, for the regime for UK funds to bed in, and for further clarity on the extension of SDR to funds in the Overseas Funds Regime.

Consultation responses had also placed focus on how the labelling criteria would work in practice for portfolio managers, noting their different roles and responsibilities, resourcing, and types of products and services offered compared to asset managers.

While feedback was broadly positive on portfolio managers’ offerings to retail investors being subject to naming and marketing rules, there were calls for clarity on how they apply to different types of portfolios and client relationships.

The FCA had proposed a tiered approach to disclosures, including consumer-facing, product-level, and entity-level reports, but respondents asked for clarity on practical considerations and how they interact with other sustainability reporting requirements.

Commenting on the delay to the proposals, Quilter head of responsible investment, Gemma Woodward, said: “Extending the SDR to portfolio management was always going to be a difficult task given the often-unique relationship between a client and their intermediary.

"Given the delays seen so far, it is pleasing to see that the FCA has listened to the industry and understood that there would have been a significant impact upon the wealth management sector.

“The FCA rightly set a high bar with SDR, but as a result we have seen the adoption of its labels take far longer than most would have expected. After initial confusion about what could and could not qualify, the fund industry is now responding but there is a lengthy backlog. Applying SDR to portfolio management at this stage, therefore, was clearly not an option.

“While it appears this move has been kicked down the road, it isn't clear whether it has been cancelled altogether. The FCA will be watching how SDR embeds within the asset management industry closely and what will need to be done to extend the regime. Wealth managers and financial advisers too should take note.

“Furthermore, the FCA has made it clear that the Consumer Duty will still play a role in ensuring customer understanding of what they are investing in, while the anti-greenwashing rule applies across the board, so consideration still has to be made.

“What is needed now is clear communication from the FCA and wide engagement from the industry to ensure that any future change that can be implemented is done so with plenty of time and comprehensive understanding of what is expected.”

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