ESG 5.4 Preparation of sustainability reports

1. (1)

   A manager must prepare the reports in ESG 5.4.1R(2) in accordance with this chapter where it:

   1. (a)

      is undertaking sustainability in-scope business in relation to a sustainability product that is not a feeder fund; and

   2. (b)

      uses either a sustainability label or one or more of the terms in ESG 4.3.2R(2) in accordance with ESG 4.3.2R(1) in relation to that product.

2. (2)

   The reports are:

   1. (a)

      Part A of a public product-level sustainability report, in circumstances where a sustainability product does not have pre-contractual materials that relate to it; and

   2. (b)

      Part B of a public product-level sustainability report in accordance with ESG 5.5.5R to ESG 5.5.12R.

A manager that is undertaking sustainability in-scope business in relation to a sustainability product must, subject to ESG 3.1.3R, prepare a sustainability entity report, regardless of whether it uses a sustainability label or one or more of the terms in ESG 4.3.2R(2) in accordance with ESG 4.3.2R(1) in relation to that product.

A manager must meet the following requirements in relation to the timing and publication of Part B of a public product-level sustainability report and a sustainability entity report:

1. (1) A manager must, subject to (1A) and (1B), produce and publish Part B of a public product-level sustainability report annually, covering a reporting period of 12 months, and must publish the first report within 16 months after the manager first starts to use a sustainability label or uses one or more of the terms listed in ESG 4.3.2R(2) in accordance with ESG 4.3.2R(1) in relation to a sustainability product.
2. (1A) A manager may prepare and publish Part B of a public product-level sustainability report which covers a reporting period of less than 12 months or which includes a period of time during which neither a sustainability label nor one or more of the terms listed in ESG 4.3.2R(2) were used in accordance with ESG 4.3.2R(1) in relation to the relevant sustainability product, providing that the manager:
   1. (a) makes clear in the report the reporting period that has been covered;
   2. (b) provides contextual information to explain why that particular reporting period has been chosen; and
   3. (c) publishes the report no later than 4 months after the end of the chosen reporting period.
3. (1B) A manager that first started to use a sustainability label or one or more of the terms listed in ESG 4.3.2R(2) in accordance with ESG 4.3.2R(1) in relation to a sustainability product before 28 February 2025 may, for the first report, choose a reporting period exceeding 12 months, providing that:
   1. (a) that first report is published no later than 30 June 2026; and
   2. (b) the manager complies with the requirements in (1A)(a) to (c).
4. (2) A manager must produce and publish a sustainability entity report annually, covering a reporting period of 12 months and, in relation to the first report:
   1. (a) where a manager meets the requirements of an enhanced SMCR firm pursuant to SYSC 23 Annex 1 8.2R paragraph 1 in relation to sustainability in-scope business, the first report must be produced and published by 2 December 2025; and
   2. (b) where a manager does not meet the requirements of an enhanced SMCR firm pursuant to SYSC 23 Annex 1 8.2R paragraph 1 but has assets under management in relation to sustainability in-scope business of £5bn or more calculated as a 3-year rolling average on annual assessment, the first report must be produced and published by 2 December 2026.
5. (3) A manager may change the reporting dates in ESG 5.4.3R(1) and ESG 5.4.3R(2) for subsequent reports following the first report, but the manager must ensure that there is no period of time which is not covered by Part B of a public product-level sustainability report or a sustainability entity report and must issue an interim report if necessary.
6. (4) A manager must take reasonable steps to publish Part B of a public product-level sustainability report and a sustainability entity report in a way that makes it easy for clients to locate and access, including, at a minimum, by making the most recent edition of those reports available in a prominent place on the main website for the business of the manager.

A manager must, where it is required to prepare a public TCFD product report, include the contents of that report (or a hyperlink to it) in Part B of a public product-level sustainability report, making clear that the public TCFD product report forms part of the manager’s overall Part B of a public product-level sustainability report with respect to climate-related disclosures.

A manager must, where it is required to prepare a TCFD entity report, include the contents of that report (or a hyperlink to it) in its sustainability entity report, making clear that the TCFD entity report forms part of the manager’s overall sustainability entity report with respect to climate-related disclosures.

A manager must comply with ESG 5.4.7R to ESG 5.4.10R in relation to preparing Part B of a public product-level sustainability report or a sustainability entity report.

In satisfying its reporting and disclosure obligations under ESG 5.4 and ESG 5.5, a manager must, insofar as is reasonably practicable, use the most up to date information available.

A manager must not disclose metrics where:

1. (1)

   there are gaps in underlying data or methodological challenges; and

2. (2)

   these data gaps or methodological challenges cannot be addressed using proxy data or assumptions without the resulting disclosure, in the reasonable opinion of the manager, being misleading.

A manager must ensure that Part B of a public product-level sustainability report and a sustainability entity report include an adequate explanation of:

1. (1)

   any gaps in the underlying data relied upon to make sustainability-related disclosures;

2. (2)

   how the manager has addressed these gaps, for example, by using proxy data or assumptions and briefly setting out any methodologies used in doing so, providing relevant contextual information and explaining any limitations of the approach;

3. (3)

   any metrics that the manager has not been able to disclose, on the basis that ESG 5.4.9R applies; and

4. (4)

   in respect of ESG 5.4.10R(3):

   1. (a)

      the gaps in underlying data or methodological challenges that have resulted in the manager being unable to make the relevant disclosure;

   2. (b)

      why the manager has not been able to address those gaps or challenges using proxy data or assumptions; and

   3. (c)

      what steps the manager will take to address those gaps or challenges in the future.

ESG 5.4.13R to ESG 5.4.15R apply to a manager in relation to preparing Part B of a public product-level sustainability report or a sustainability entity report.

A manager may include hyperlinks and cross-references to relevant sustainability-related disclosures contained in a third party’s sustainability reporting where such information enables the manager to prepare Part B of a public product-level sustainability report or a sustainability entity report.

The manager must set out the rationale for relying on any third-party sustainability disclosures, and any deviations between the third party’s approach and that of the manager.

Where relevant, a manager may also draw links and refer to Part B of its public product-level sustainability report from its sustainability entity report and vice versa.