FCA launches discussion paper on investment products and ESG strategy

The FCA is today publishing a Discussion Paper inviting views on potential criteria to classify and label investment products. This is aimed at helping consumers navigate their sustainability characteristics. The Discussion Paper forms part of the FCA’s new wider ESG Strategy, also released today. The strategy sets out the FCA’s critical role in supporting the transition to a more sustainable economy, working with industry, listed companies and international partners. The Strategy will be built around five key themes:

• Transparency – promoting transparency on climate change and wider sustainability along the value chain
• Trust – building trust and integrity in ESG-labelled instruments, products and the supporting ecosystem
• Tools – working with others to enhance industry capabilities and support firms’ management of climate-related and wider sustainability risks, opportunities and impacts
• Transition – supporting the role of finance in delivering a market-led transition to a more sustainable economy
• Team – developing strategies, organisational structures, resources and tools to support the integration of ESG into FCA activities

The FCA is also gathering feedback on supporting entity-level and product-level disclosures. The FCA will leverage existing initiatives in this area to ensure coherence with market practice and other regulation. The input received will then guide the FCA’s policy design in this area, ahead of consultations on new proposals in spring 2022. Emma Wall, Head of Investment Analysis and Research at Hargreaves Lansdown: “It is fantastic to see the regulator giving responsible investing the attention it deserves. We believe investing with environmental, social and governance issues in mind is simply good risk management – leaders who run businesses conduct aware, with the climate and society in mind, are likely to have sustainable revenues and profits. Investors have recognised this too – amongst our clients flows into responsible investment funds have gone up 6,000% in the last five years. We welcome the particular focus on transparency, which we know investors are calling for, as well as the wider commitment to supporting the transition to a greener, cleaner economy.”