SRI Services welcomes new FCA ‘ESG and Sustainable Investment Principles’

Posted on: July 19th, 2021

SRI Services welcomes new FCA ‘ESG and Sustainable Investment Principles’

I am delighted to welcome the launch of the FCA’s new ‘ESG & sustainable investment principles’ which I have been looking forward to since  the FCA’s director of strategy Richard Monks first aired the idea at our conference last October.

The principles were published this morning in the form of a ‘Dear Chair’ letter to authorised fund managers (AFMs) – under the overarching title: “Authorised ESG & Sustainable Investment Funds: improving quality and clarity” with the principles themselves headed: Guiding principles on design, delivery and disclosure of ESG and sustainable investment funds”

Link to FCA page:

Link to directly download the letter:

The letter is 9 pages long and appears to be very much in line with what I had hoped for and expected. It is notably comprehensive and includes  reference to both stock selection and stewardship activity – as well as the relevance of this area to the overall functioning of markets – which is wonderful to see!

The headers for the principles are below:

Overarching principle: Consistency

Principle 1. The design of responsible or sustainable investment funds and disclosure of key design elements in fund documentation

Principle 2. The delivery of ESG investment funds and ongoing monitoring of holdings

Principle 3. Pre-contractual and ongoing periodic disclosures on responsible or sustainable investment funds should be easily available to consumers and contain information that helps them make investment decisions

Some initial thoughts… I suspect there may be some lively debates around these principles over the coming months, but I personally very much like this approach as well as the content.  It is neither too prescriptive nor too vague. It offers examples and explanations and aims to sure up existing rules and improve the quality of new fund approvals – which is a great place to start.

You should also be aware that these principles were as far as the FCA was able to go without new primary legislation (as new primarily legislation requires government involvement).

The recent flurry of policy activity however now means that the FCA will soon be able to go further. Notably the Chancellor’s Mansion House speech – and the linked FCA’s business plan (last week) – which reference the government’s aims and ambitions in this area.

So with all this activity and COP26 just around the corner it looks likely that this area will become even faster moving very soon.  So, keep your eyes peeled and if you are not confident in this area already please do get reading!  (A good place to start is the thought pieces published by our partners here .)

You may also like to sign up to our all day conference for retail intermediaries / IFAs – on 6 October, where the FCA as well as many of our fund manager partners will be talking.