The UK’s sustainable finance rulebook just got an update. On December 19, 2025, the FCA published Handbook Notice No. 136, introducing targeted amendments to the ESG Sourcebook that affect the FCA Sustainability Disclosure Requirements.
The changes give firms more flexibility in how they publish sustainability reports and bring much-needed clarity for index fund managers. If you work in UK asset management, compliance, or sustainable finance, here is exactly what changed and what your firm needs to do next.
Before we get into the updates, a quick recap. The FCA Sustainability Disclosure Requirements were introduced through policy statement PS23/16 in November 2023. They are a package of rules designed to bring transparency and accountability to the UK sustainable investment market. The regime covers four main areas:
The regime was established to address a genuine issue. Investors and regulators had grown frustrated with sustainability claims that could not be verified or substantiated. SDR was designed to close that credibility gap — and to give genuine sustainable products a way to stand out.
This is also why ESG and Sustainability Reporting have become one of the most in-demand services for asset managers and financial firms operating in the UK market today.
The FCA published these amendments through Handbook Notice No. 136, following a consultation process under CP25/24. The changes are described as “minor amendments” — but they carry practical weight for firms managing labelled products.
The most significant change relates to how firms publish Part B of their public product-level sustainability report.
Under the previous rules, the structure and timing of these reports were more rigid. The December 2025 amendments give firms greater flexibility in how they organise and publish this section. The FCA’s stated intent is to give firms more room on the publication of Part B of a public product-level sustainability report — while still giving proper effect to the existing rule under ESG 4.2.4R(2)(b).
This is a practical win. Firms have been grappling with the operational demands of SDR reporting since the product disclosure requirements took effect in late 2024. If you need help aligning your reporting structure to these updated requirements, our sustainable finance advisory team can walk you through the options.
The FCA also added new guidance under ESG 4.2.7G specifically for index-tracking funds. Fund managers can now satisfy the rule in ESG 4.2.4R(2)(b) through an index provider’s asset selection, provided those assets are tied to a robust, evidence-based standard that measures environmental and/or social sustainability in absolute terms.
This matters for passive strategies. It gives index fund managers a clearer path to compliance without having to independently assess every underlying asset.
The amendments also confirmed that firms are not required to produce on-demand sustainability product reports until at least 16 months after the first use of a label or specified terms. This removes an earlier ambiguity around the 12-month reporting period reference in ESG 5.4.8R.
The FCA Sustainability Disclosure Requirements have been evolving steadily since 2023. Each clarification and amendment reflects the regulator responding to real-world feedback from firms. Here’s the timeline that puts this in context:
| May 2024 | Anti-greenwashing rule came into effect |
| July 2024 | Investment labels became available for UK-based funds |
| December 2024 | Naming, marketing, and product disclosure rules took effect |
| February 2025 | Handbook Notice 127 — earlier SDR clarifications published |
| December 2025 | Handbook Notice 136 published; firms with AUM over £50bn hit entity-level disclosure deadline |
| December 2026 | Firms with AUM over £5bn face entity-level disclosure deadlines |
The December 2025 amendments arrived right as larger firms were hitting their first entity-level disclosure deadlines. The timing is deliberate. The FCA is trying to ease the operational burden without softening the core requirements.
As noted by Hogan Lovells in their December 2025 ESG Regulation Round-Up, these changes are consistent with the policy proposals originally consulted on in CP22/20 and finalised in PS23/16.
It’s worth being clear about what these amendments do not touch.
The anti-greenwashing rule remains fully in force and applies to every FCA-authorised firm. The four investment labels, i.e., Sustainability Focus, Sustainability Improvers, Sustainability Impact, and Sustainability Mixed Goals, are unchanged. The naming restrictions that prohibit the use of “sustainable,” “sustainability,” and “impact” in unlabelled product names remain in place.
The FCA Sustainability Disclosure Requirements are still a demanding regime. These amendments make implementation more workable. They do not lower the bar.
If you are an asset manager subject to the FCA Sustainability Disclosure Requirements, here are three practical steps to take in light of the December 2025 changes.
For firms that need support navigating these obligations end-to-end, our ESG Assurance service is built specifically to help organisations verify and validate their sustainability disclosures with confidence. And if your team needs to get up to speed on the SDR framework quickly, our ESG Training program covers the full regime in a practical, implementation-focused format.
These amendments are a small piece of a much larger shift in UK sustainable finance regulation.
According to Akin Gump’s analysis of SDR developments, the regime is designed to be extended progressively, with portfolio management services potentially brought into scope in future consultations.
Beyond SDR, the UK regulatory pipeline for 2026 includes an FCA consultation on disclosure requirements for UK-listed companies, a Policy Statement on ESG ratings regulation expected in H2 2026, and the Stewardship Code 2026, which took effect on January 1, 2026. From June 2028, any firm providing ESG ratings in the UK will require FCA authorisation.
The FCA Sustainability Disclosure Requirements are not a one-time compliance exercise. They are a foundation that the regulator is continuing to build on. Firms that treat SDR as an ongoing program — rather than a box-ticking exercise — will be far better positioned as the regime matures.
The December 2025 updates to the FCA Sustainability Disclosure Requirements are targeted and technical. They do not change the big picture. But they do give firms more room to structure their sustainability product reports in a way that works operationally — and they bring much-needed clarity for index fund managers.
If you have been waiting for the dust to settle on SDR before finalising your reporting approach, this is a good moment to revisit the rules with fresh eyes.
The FCA has shown it is willing to listen and adjust. Firms that engage proactively, rather than wait for enforcement, will be better positioned as the regime continues to evolve. Whether you need help with reporting, assurance, or team training, explore our full ESG and Sustainability services to see how we can support your compliance journey.
