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Greening Finance: A Roadmap to Sustainable Investing in the UK - A view from Financial Services

  • United Kingdom
  • ESG
  • Financial services and markets regulation
  • Investment funds and asset management
  • Pensions
  • ESG
  • Financial services



What is the Greening Finance Roadmap?

On 18 October 2021, a few weeks ahead of the UN Climate Change Summit 2021 (COP26), the UK government published its policy paper Greening Finance: A Roadmap to Sustainable Investing.

The Roadmap sets out the government’s ambition to ‘green’ the UK financial system and align it with the UK’s net zero commitment.  The Roadmap builds on the UK government’s Green Finance strategy published in 2019.  The government’s plan is divided into three phases: Information, Action and Shifting.  The Roadmap covers the first phase: ensuring that there is an information flow from corporates in the “real world” economy to the financial sector.  Phases 2 and 3 will follow with the government also committing to update the Green Finance Strategy in 2022.

The first phase of the Roadmap is divided into three key elements: a new sustainability disclosure regime, introduction of a UK green taxonomy and a renewed focus on stewardship.  Alongside these initiatives, the government is expecting firms to put in place and publish transition plans and is also considering how data providers should be regulated going forward.

The references to ‘finance’ and ‘investing’ perhaps paint the implications of this paper too narrowly, the Roadmap looks to the whole economy so covers all corporates but also looks to the financial services sector as having a huge role to play in advancing the green agenda.  This briefing focuses on the impact for the financial services sector.  For the impact on corporates, please see our client briefing “UK government roadmap on greening finance and sustainable investing: Impact for companies”.

Sustainability Disclosure Regime (SDR)

Asset managers and asset owners will be subject to new Sustainability Disclosure Requirements (“SDR”) first announced by the Chancellor in the Mansion House speech in July 2021.  SDR builds on the UK’s implementation of the Task Force on Climate-related Financial Disclosure (“TCFD”) recommendations, which will require mandatory TCFD disclosures by 2025 and looks to provide a single framework under which all organisations can make relevant disclosures.  SDR includes investment disclosures, standardised metrics and reporting frameworks for companies.

What disclosure will be required?

SDR has been described informally as the UK’s ‘answer’ to the EU’s Sustainable Finance Disclosure Regulation (SFDR) but in reality it is much wider.  The UK SDR aims to address in one framework what the EU has sought to achieve with many pieces of sectoral legislation.  You could therefore think of the SDR as the UK’s rolled-up answer to:

  • the Non-Financial Reporting Directive (“NFRD”)/Corporate Sustainability Reporting Directive (“CSRD”)
  • SFDR
  • changes to MiFID/IDD/UCITS/AIFMD

It therefore addresses multiple points in the investment ecosystem.


All companies, including financial services companies, will be required to make sustainability disclosures. 

SDR is likely to require reporting:

  • under the standards being created by the International Sustainability Standards Board (“ISSB”) (established by the International Financial Reporting Standards (IFRS) Foundation) which will build on the TCFD regime
  • on environmental impact under the UK Taxonomy

The government expects the ISSB will be the backbone of the corporate reporting element of the SDR framework - calling it a ‘core component’.  The government is therefore creating a mechanism to adopt and endorse ISSB-issued standards for use in the UK. 

Asset managers and asset owners:

SDR will require reporting:

  • against ISSB standards
  • the level of alignment of their economic activities with the UK Green Taxonomy.  Specific economic activities must meet the criteria set out in the UK Green Taxonomy
  • against a set of minimum safeguards, aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights
  • of disclosures in a consumer-friendly format, with more detailed disclosures required for sophisticated investors

Product level:

Firms will disclose sustainability performance at product level for both products and portfolios.  Disclosures must be made whether or not the product or portfolio is marketed as sustainable.  These disclosures will be the same as those for asset managers and asset owners, with additional product-level climate-related metrics.

The product-level metrics are expected to form the basis of the sustainable investment labelling regime the FCA is currently developing, classifying investment products objectively against specified sustainability criteria.  Further details will be published in an Autumn 2021 Discussion Paper.

SDR will require firms to make disclosures relating to their ‘transition plan’ – the concrete actions and targets that many business rely upon to deliver their net zero commitments.  The Roadmap indicates that certain firms will be subject to a comply or explain obligation to publish plans which are aligned with the UK government’s net zero targets.  Currently there is no detail on which firms will be in scope or the format of the transition plans, however, the government is developing templates and best practice guidance which we expect will be incorporated into the SDR in time.

The Roadmap sets out a 3-4 year timescale to co-ordinate the various initiatives so that the flow of information works down the chain, starting with the corporates.  Potentially the main SDR regime will apply to asset managers and asset owners in 2024-2025, subject to the relevant consultations being completed and implemented.

ESG Data Providers

Given the importance that the data and ratings providers have to play in the SDR regime, the FCA is considering bringing those firms within the FCA regulatory perimeter.  Further details will be announced in 2022.

UK Green Taxonomy

As trailed by the Chancellor in November 2020, the Roadmap introduces the concept of a UK Green Taxonomy.  The UK was involved in creating the EU Green Taxonomy, which it drew heavily upon when creating the UK Green Taxonomy, so those with EU operations will already be familiar with the key concepts.

The aim of the UK Green Taxonomy is that in scope companies and the providers of investment funds and products will disclose the proportion of their activities or portfolio which are UK Green Taxonomy aligned.

Like its EU cousin, the UK Green Taxonomy will focus initially on environmental objectives and has the same six objectives:

  • climate change mitigation
  • climate change adaptation
  • sustainable use and protections of water and marine resources
  • transition to a circular economy
  • pollution prevention and control
  • protection and restoration of biodiversity and ecosystems

There will be consultation on the first two objectives in 2022.

Each objective will have Technical Screening Criteria (“TSC”) for each economic activity in the UK Taxonomy to identify how that activity makes a contribution to the environmental objective.

To be aligned with the UK Green Taxonomy, an activity must meet the following 3 tests:

  • substantially contribute to one of the six environmental objectives
  • not significantly harm the achievement of the other objectives (including non-environmental objectives)
  • meet a set of minimum standards for doing business aligned with the OECD Guidelines for Multinational Enterprise and the UN Guiding Principles on Business and Human Rights

The UK Green Taxonomy will take into account companies which are in the transition phase and those which are aiming to meet environmental objectives in the future.  Those companies which can’t yet carry out their activities in alignment with net zero but are able to demonstrate they meet best in class thresholds for their industry will be considered to be aligned with the UK Green Taxonomy.  The UK Green Taxonomy will consider the level of firms’ investment into UK Green Taxonomy aligned activities.  If a firm undertakes activities which are not yet sustainable, but which enable firms to meet their environmental objectives in other sectors, those activities will also be taken into account by the UK Green Taxonomy.

Ultimately, corporates will be required to disclose how much of their expenditure and turnover is related to UK Green Taxonomy aligned activities.  Asset managers and asset owners will then use this information to disclose to what extent their products are UK Green Taxonomy aligned.

Developing the TSCs will be a considerable task, notwithstanding the EU’s work on green standards which we expect the UK to take as inspiration.  Much of this work will take place in the background and the UK government has established a Green Technical Advisory Group to inform this work.  The TSCs will be subject to consultations before being brought into law by secondary legislation in the form of statutory instruments.


The Roadmap provides a very strong steer for companies on stewardship, particularly for the pensions and investment sectors.  The Government expects firms will:

  • work on stewardship in their organisations and apply to become members of the UK Stewardship Code
  • consider the data generated through their SDR engagement when allocating capital
  • actively monitor and challenge companies, using their influence as investors
  • be transparent on their engagement and voting, including publishing clear and transparent reports of their record
  • provide leadership, e.g.:
    • join the Glasgow Financial Alliance for Net Zero (“GFANZ”)
    • publish a high quality transition plan by the end of 2022

What does this mean for you?

The Roadmap sets out a direction of travel but is not itself the destination.  Quite a lot of the substance will be subject to further consultation.  We expect to see substantial consultation on all these areas in the coming months and years as the flesh starts to get put on the bones.  We expect this to commence with an FCA Discussion Paper very shortly.

While the timelines look some way out, our experience with the EU’s implementation of SFDR and EU Green Taxonomy shows that a lot of work will need to go into understanding the requirements and how they need to be implemented as well as gathering the relevant data.  For those already complying with the EU regime a gap analysis may need to be carried out to understand the differences between the two regimes.


The following timeline will commence from the coming into force of the necessary primary legislation, which we expect to happen in 2022.  We summarise the timeline (set out in greater detail in the Roadmap) for implementing the new requirements in this table.


+ 1-2 years

+ 2-3 years

+ 3 years

Asset Manager and Asset Owner Disclosure

Consultation on potential mandatory sustainability-related disclosures

Subject to 2022 consultation, potential mandatory sustainability-related disclosures

Mandatory disclosure requirements incorporating taxonomy disclosures to be presented in a sustainability report referenced within the annual report

For: funds > £5 billion

For: funds > £1 billion

Investment Product Disclosure

Consultation on potential mandatory consumer-facing and more detailed product-level sustainability-related disclosure

Subject to consultation in 2022, potential mandatory consumer-facing and more detailed product-level sustainability-related disclosures

Consultation on potential mandatory sustainability-related labels for investment products

Subject to consultation, potential mandatory sustainable product labels for investment products


How Eversheds Sutherland can help

Eversheds Sutherland has an excellent relationship with the FCA and a proven track record assisting businesses with their regulatory and compliance requirements.  With our Konexo compliance team we have previously worked with managers on all aspects of the ESG compliance process and can consider any necessary adjustments to your compliance reporting with you.

We also work on these reports with Konexo, our provider of alternative legal and compliance services. For more information on how Konexo can support your business, please contact Simon Collins.

For more information on the implications of this review and how this affects you, please get in touch.