If you’re a DFM who’s confused about the implications of the SDR labelling regime, then come and have a seat. This is a safe space. 

While the deadline for portfolio management sustainability labels is still a little way off yet – December 2, to be precise – the end of the consultation process is a little over a week away now, on June 14.

And with just under six months to go, sustainability advisor MainStreet Partners says the investment industry is finding the requirements more complicated than first thought – with DFMs in dire need of better guidance. 

“Some fund selectors and fund of funds providers are telling us they are considering walking away from the labels because they don’t have the scale to absorb the costs necessary for SDR compliance, which could lead to consolidation,” Jacob Kasaska, research associate at MainStreet said.

“Family offices are another area of the market left to their own devices, without the necessary cost-efficient tools to help them, despite some welcoming the rules and wanting to transition to this new compliance regime.”

He added that while asset managers were largely onboard, the challenges were most prevalent for the manufacturers of products for retail clients in financial planning, such as the MPS world. 

MainStreet says DFMs now must establish an asset-specific, robust, absolute measure of sustainability for each of their underlying funds, which is markedly different from the initial idea to rely on the underlying fund labels to attain a label for the portfolio itself.

However, they are sitting tight until next week to know the rules for certain.

“We eagerly await the outcome of the FCA consultation on MPS which concludes on the June 14 to see if there is any more clarity as to how fund buyers are expected to treat their ‘assets’ and attain a label,” he added. 

We’ll touch base on this once we know more, so do stay tuned.