The ESG sourcebook — FCA Handbook ESG (Sustainability Disclosure Requirements)

The ESG sourcebook is where the FCA's sustainability rulebook lives — two regimes stacked in one book. The first is the TCFD-aligned climate disclosure regime (ESG 2), which since 2022 has required larger UK asset managers and asset owners to publish entity- and product-level climate reports. The second, newer and more commercially charged, is the Sustainability Disclosure Requirements (SDR) and investment-labels regime (ESG 3–5, plus the anti-greenwashing rule in ESG 4): a set of four sustainability fund labels, hard restrictions on using words like "sustainable" or "ESG" in a fund's name or marketing unless it qualifies, and layered consumer-facing, pre-contractual and product-level disclosures. It bites on any FCA-authorised firm — the anti-greenwashing rule applies to all of them, not just self-styled ESG managers.

• The anti-greenwashing rule (everyone)
• The four investment labels
• Naming and marketing
• The disclosure stack
• TCFD climate disclosures
• What it works with

The anti-greenwashing rule (everyone)

The rule with the widest reach is ESG 4.3.1R: any reference a firm makes to the sustainability characteristics of a product or service must be fair, clear and not misleading, and must be consistent with the actual sustainability profile of what it is describing. It is a general rule — it applies to every FCA-authorised firm that communicates to UK clients, whether or not it runs a labelled fund, and whether or not it markets itself as "green". This is the provision the FCA reaches for when a claim outruns the substance; the separately-published finalised guidance FG24/3 (which the corpus also holds) is the FCA's read on how to comply with it in practice.

The four investment labels

ESG 4 creates an opt-in labelling regime. A UK fund may use one of four sustainability investment labels only if it meets the qualifying criteria (a sustainability objective, at least 70% of assets meeting a credible standard, and the associated governance, resourcing and KPI requirements in ESG 4.2):

Labels are voluntary — but if you want one, the bar is the ESG 4.2 criteria, and getting a label wrong is itself a compliance failure. A fund that does not qualify simply goes unlabelled; that is allowed, but it then runs straight into the naming-and-marketing limits below.

Naming and marketing

ESG 4.3 restricts how sustainability language can be used. Broadly, a UK retail fund may not use terms like "sustainable", "sustainability" or "impact" in its name or financial-promotion unless it holds the corresponding label — with a narrower carve-out that lets an unlabelled fund use certain ESG/sustainability words in its name only if it also carries a prescribed disclaimer and meets set conditions. The point is to close the gap the FCA saw between fund names that sound sustainable and portfolios that are not.

The disclosure stack

ESG 5 layers the disclosures by audience:

• Consumer-facing disclosure (ESG 5.2) — a short, standardised summary for retail investors: the label (if any), the sustainability approach, and the key "unexpected investments".
• Pre-contractual disclosure (ESG 5.3) — the fund's sustainability objective and approach, disclosed before investment.
• Product- and entity-level sustainability reports (ESG 5.4–5.6) — ongoing reporting on how the objective is being met, and firm-level disclosures for larger managers.

TCFD climate disclosures

Separately from SDR, ESG 2 carries the older TCFD-aligned (Task Force on Climate-related Financial Disclosures) climate-related disclosure rules: in-scope asset managers and asset owners (above a size threshold) must publish an annual entity-level TCFD report (ESG 2.2) on how they govern and manage climate-related risks and opportunities, and product-level climate metrics (ESG 2.3). This regime pre-dates SDR and runs alongside it — a large manager can owe both a TCFD entity report and the SDR disclosures.

What it works with

The ESG sourcebook is a disclosure and labelling overlay — it does not authorise funds or managers, it governs what they may claim. The underlying product rules for a UK authorised fund live in the COLL sourcebook (and, for AIFMs, the FUND sourcebook); the ESG rules sit on top. The anti-greenwashing rule is read together with the FCA's finalised guidance FG24/3, which the corpus holds as the guidance layer on ESG 4.3.1R. For the EU counterpart, the comparison point is SFDR (not yet in the corpus) — but note the models differ: SDR is a labelling regime with a general anti-greenwashing rule, where SFDR is a disclosure-category regime.

The gotcha: the anti-greenwashing rule and the labels regime are not the same thing, and firms conflate them. ESG 4.3.1R binds everyone and is already in force — you can breach it with a single overstated line in a factsheet, label or no label. The labels, by contrast, are opt-in and gated by the ESG 4.2 criteria. The trap is a manager who assumes that because they have not taken a label, the sustainability rules do not apply — they do: the anti-greenwashing rule and the naming-and-marketing restrictions catch the unlabelled fund too.