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Recent sustainable investment policy developments

December 7th, 2021

If, like me, you have been struggling to keep up with the recent policy developments in sustainable investments you may find the information below useful.

The first section is from the body of our newsletter sent today, the table below has additional links.

 

December Newsletter:

To my mind this really got started In March 2021 when Rishi Sunak, the Chancellor of the Exchequer, wrote to Nikhil Rathi, Chief Executive of the FCA notifying him and other financial regulators that ‘transitioning to an environmentally sustainable and resilient net zero economy was part of the country’s economic strategy’ indicating that climate change was now part of their remit.

More recent ‘major’ developments for UK financial services intermediaries include:

The Chancellor’s July Mansion House speech (‘A new chapter for financial services’opened the door to new primary legislation, amongst other things saying: ‘We’re launching new requirements for businesses and financial products to disclose sustainability information…’.

The FCAs July ‘Dear Chair’ letter, with its ‘sustainable investment principles’ addendum sought to fix the foundations by saying how they expect the ESG and Sustainable investment fund market to operate, focusing on guiding principles around ‘design, delivery and disclosure’.

The FCA’s (July) business plan went further, saying they wanted to improve trust – and to encourage the delivery of high quality climate and sustainability related disclosures, increased stewardship, innovation, a market led transition to a more sustainable future and fund labelling – thereby flagging what was to come.

The government’s Green Finance roadmap, launched in October 2021, pointed to even wider ambition.  It referenced the development of a UK green taxonomy, wider adoption of TCFD (climate change disclosures) and proposals to further explore sustainability related disclosures and fund labelling (including references to data and ratings). Financial advisers are briefly mentioned in this document (I wrote a piece for FT Adviser on this – linked here.)

COP26 saw the publication of the FCAs ‘Sustainability Disclosure Requirements (SDR) and investment labels’ discussion paper DP21/4 (please respond by 7 January,  this is going to be important!)

  • Section 1.9 sets out its purpose as informing their work on ‘the development of sustainable investment labels, consumer facing disclosures for investment products, client and consumer-facing entity and product-level disclosures buy asset managers and FCA-regulated asset owners.’
  • The aims also highlight managing the ‘transition to a sustainable economy’ adding: ‘We want consumers to be able effectively to navigate the market for sustainable financial products and have enough information to assess which products meet their needs and hold firms to account for their sustainability claims’.
  • The consultation closes on 7 January 2022 – please respond to this if you can.  Here is the full url: https://www.fca.org.uk/publications/discussion-papers/dp21-4-sustainability-disclosure-requirements-investment-labels
  • This work is to be supported by an advisory group ‘DLAG’ that I am delighted to be a part of.
  • I have written a brief piece on labelling for ESG Clarity – personal views, of course.

COP26 also saw the announcement of the FCA’s paper ‘A strategy for positive change: our ESG priorities’ which gives ESG national and international context.

  • The strategy indicates the actions the regulator expects to put in place (and intended outcomes), under the overarching aim of ‘support[ing] the financial sector in driving positive change, including the transition to net zero…’.
  • This included the announcement that the government wants the UK to become the ‘Worlds first net zero financial centre’

The FCA also published an updated climate change adaptation report 

There has also been a huge amount of work going on internationally – notably at IOSCO (international standards) , with the creation of GFANZ (investor coalition) , ISSB, TCFD, FSB and beyond. The international context of all this is crucial – but too lengthy to cover here today!

So to summarise, expect sustainability to feature more significantly in your business activities going forward…

 

Additional links:

 

Author/Presenter Source Link Other
Mark Manning FCA SRI Services https://www.youtube.com/watch?v=X7uDsN6lEkE&t=44s 45 minute video – presented before COP26
UK government Gov.uk https://www.gov.uk/government/publications/greening-finance-a-roadmap-to-sustainable-investing Greening Finance: a roadmap to sustainable investing
Various – at COP26 COP Blue Zone https://www.youtube.com/watch?v=Zw5lkLCFFj8

 

COP26 finance day, 3 hour video
Rishi Sunak Guardian excerpts from COP26 speech https://youtu.be/exwwnwpiTP0 2 mins – talking about rewiring the financial system
UNFCC videos COP26 channel https://www.youtube.com/c/UnfcccInt/videos cop26 A wide range of official COP 26 related videos
FCA paper on SDR & labels FCA https://www.fca.org.uk/publication/discussion/dp21-4.pdf Discussion paper – deadline January 22
Barack Obama COP26 talk COP speech https://youtu.be/9xUgoxagJJA a superb summary of the issues
Nikhil Rathi a strategy for positive change FCA website https://www.fca.org.uk/news/speeches/strategy-positive-sustainable-change

‘a strategy for positive change’.

Net Zero financial centre fact sheet UK Govt https://www.gov.uk/government/publications/fact-sheet-net-zero-aligned-financial-centre Summarising net zero financial centre announcement

 

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