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Over a year after the FCA introduced the Sustainability Disclosure Requirements (SDR) and fund labelling regime, AREF’s ESG & Impact Investing Committee has published updated Guidance on the Application of the SDR Labelling Regime for Real Estate Funds.
The refreshed guidance provides practical clarification for real estate fund managers, reflecting evolving FCA expectations and recent clarifications on scope and timing as the regime has continued to embed.
Since mid-2024, the core elements of SDR have taken effect, including the anti-greenwashing rule, the naming and marketing rules, and the availability of voluntary sustainability labels for eligible UK-domiciled funds. The FCA’s plans to extend the labelling regime to portfolio management and overseas-recognised funds remain on pause, meaning labels are currently only available to UK funds managed by eligible UK-based managers. Both retail and professional-only funds may adopt a label where they meet the criteria.
More broadly, the UK’s decision not to pursue a Green Taxonomy signals a continued preference for principles-based, investor-focused sustainability reporting rather than additional classification frameworks. In this context, real estate fund managers should prepare for closer scrutiny of sustainability claims in practice by strengthening data quality, governance and controls, and embedding sustainability objectives into investment and asset management processes.
The updated AREF guidance on SDR is intended to support members as market practice continues to develop.