Featured Product

    FCA Sets Out Principles for Disclosure of ESG and Sustainable Funds

    July 19, 2021

    In a letter to the chairs of authorized fund managers, the Financial Conduct Authority (FCA) has set out expectations on the design, delivery, and disclosure of environmental, social, and governance (ESG) and sustainable investment funds. To reinforce its expectations, FCA developed a set of guiding principles to ensure that any ESG-related claims are clear and not misleading, both at the time of application and on an ongoing basis, to enable consumers to make informed choices. The guiding principles comprise an overarching principle on consistency and three supporting principles that focus on design, delivery, and disclosure. Each principle is accompanied by a set of "key considerations," which add clarity.

    The overarching principle states that a fund’s ESG or sustainability focus should be reflected consistently in its design, delivery, and disclosure. The focus on ESG or sustainability should be reflected consistently in the name, the stated objectives, the documented investment policy and strategy, and the holdings. FCA expects authorized investment funds pursuing a responsible or sustainable investment strategy and those that claim to pursue ESG or sustainability characteristics, themes, or outcomes to consider the overarching principle, supporting principles, and key considerations. The other principles include:

    • The design of responsible or sustainable investment funds and disclosure of key design elements in fund documentation. References to ESG (or related terms) in a fund’s name, financial promotions, or fund documentation should fairly reflect the materiality of ESG/sustainability considerations to the objectives and/or investment policy and strategy of the fund.
    • The delivery of ESG investment funds and ongoing monitoring of holdings. The resources (including skills, experience, technology, research, data, and analytical tools) that a firm applies in pursuit of a fund’s stated ESG objectives should be appropriate. The way that a fund’s ESG investment strategy is implemented, and the profile of its holdings, should be consistent with its disclosed objectives on an ongoing basis.
    • 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. ESG or sustainability-related information in a key investor information document should be easily available, clear, succinct, and comprehensible, avoiding the use of jargon and technical terms. Funds should disclose information to enable consumers to make an informed judgment about the merits of investing. Periodic fund disclosures should include evaluation against stated ESG or sustainability characteristics, themes, or outcomes as well as the evidence of actions taken in pursuit of the fund’s stated aims.

    The guiding principles are relevant where an FCA authorized investment fund pursues a responsible or sustainable investment strategy and claims to pursue sustainability characteristics, themes, or outcomes. These principles are targeted at funds that make specific ESG-related claims, not those that integrate ESG considerations into mainstream investment processes. The guiding principles complement the recent FCA proposals to implement climate-related disclosure rules for asset managers, life insurers, and FCA-regulated pension schemes. The guiding principles have been developed with reference to the existing statutory requirements and the existing Handbook rules and guidance. 

     

    Related Links

    Keywords: Europe, UK, Securities, ESG, Sustainable Investment Funds, Climate Change Risk, Sustainable Finance, Guiding Principles, FCA

    Related Articles
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Publishes Methodological Guide to Mystery Shopping

    The European Banking Authority (EBA) published a methodological guide to mystery shopping.

    July 21, 2021 WebPage Regulatory News
    News

    APRA Issues Update on Capital Reform Policy Settings for Banks

    The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.

    July 21, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Assess Continuity Planning of Market Infrastructures

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.

    July 21, 2021 WebPage Regulatory News
    News

    BoE Announces Changes to Validation Rules for Form BTL

    The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.

    July 20, 2021 WebPage Regulatory News
    News

    BCBS Proposes Changes to Process for Reviewing G-SIB Methodology

    The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.

    July 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7281