Sustainability: taking stock of regulatory changes

3 min readFeb 19, 2024

The UK has been a relative leader in climate policy since ‘the Paris Agreement’ in 2016, In 2019 The UK established a legally binding Net Zero target and committed to becoming the world’s first Net Zero-aligned Financial Centre. This has spurred policymakers and regulators to design and implement a range of sustainability related rules that affect businesses across the UK financial services industry and private capital.

These rules are aimed at improving the quality and breadth of sustainability-related information, data provided to the market and preventing ‘greenwashing.’ BVCA survey data shows that 11.5% of the funds i surveyed were SFDR article 8 funds, with 6.7% falling under SFDR article 9. Furthermore, as part of updates to the UK’s Green Finance Strategy in 2023, the Government acknowledged that private investment is critical to help plug the investment gap. The need for the significant investment required to achieve Net Zero was reinforced at COP28, with the IMF reporting that ‘the path to Net Zero by 2050 requires low-carbon investments to rise from $900 billion in 2020 to $5 trillion annually by 2030’.

To unlock the potential for private capital to help deliver this investment, there is a need for consistent and clear Net Zero policies alongside interoperable and proportionate sustainability regulation that is compatible with international standards and effectively calibrated to the private capital investment model, as well as mainstream finance. Below we have highlighted some of the key developments in sustainability regulation during 2023.

European Union

To date, the EU has led the way and been more ambitious on sustainability regulation. However, frameworks like Sustainable Finance Disclosure Regulations (SFDR), which applies to retail and professional products alike, have at times proved burdensome and lacked clarity. Indeed, SFDR is currently under review by the European Commission, which is considering its future direction as a tool to ensure investors can identify sustainable investment opportunities effectively. Other developments have included the Corporate Sustainability Reporting Directive (CSRD), which requires larger EU-focused companies to report on the impact of their corporate activities on people and planet and incorporates the concept of ‘double materiality’. The EU is also pressing ahead with its Corporate Sustainability Due Diligence Directive (CSDDD), which sets out requirements for due diligence processes within organisations’ value chains. This goes beyond disclosure, with the aim of ensuring that businesses address the potential adverse impacts of their activities on environmental and social issues.

United Kingdom

So far, the UK has taken a slightly different tack. The FCA is (seemingly) taking advantage of its second mover place relative to the EU on broader sustainability disclosures (as distinct from climate-based disclosures), with November’s finalisation of the UK Sustainability Disclosure Requirements (SDR). These are more focussed on retail investment products than SFDR, and less likely to overburden or cause confusion amongst institutional investment fund industries like private capital. SDR gives the option for firms to apply one of four labels if their funds are designed to seek positive environmental or social outcomes, providing those funds meet certain criteria. The SDR framework also builds on disclosures larger firms will already be making, in particular under the FCA’s TCFD-based (Task force on Climate related Financial Disclosures) climate reporting framework, which should help streamline implementation.

It has also been welcoming to see the UK commit to and consult on endorsing the ISSB (International Sustainability Standard Board) IFRS 1 and IFRS 2 standards, via the proposed UK Sustainability Disclosure Standards (SDS). The ISSB frameworks aim to create a global corporate sustainability reporting baseline, aligning with existing disclosure frameworks such as the TCFD. The hope is that this will support standardisation and comparability and help private capital funds benefit from greater international harmonisation (thereby limiting complexity, confusion and costs). It is also worth noting that the FCA has announced it intends to update the SDR to consider these disclosure standards, once they are finalised.

Authored by Harriet Assem, Head of Sustainability, BVCA
and Tom Taylor, Head of Policy, Legal & Regulatory, BVCA




The British Private Equity & Venture Capital Association represents over 600 member firms, including more than 350 investment funds and institutional investors