John Somerville, Head of Financial Services, The London Institute of Banking & Finance
Lee Coates OBE, Director, ESG Accord Ltd
Louisa Chender, Senior Associate ESG Policy and Advisory, The Financial Conduct Authority (FCA)
The FCA have issued their consultation paper CP22/20 on their proposals for sustainability disclosure requirements (SDR) and investment leads.
This proposal intends to advance the FCA's strategic objectives to:
- make markets function well
- operational objectives to protect consumers and enhance market integrity
- increasing transparency on the sustainability profile of products and firms
- risk the harm arising from greenwashing
The aim of the proposed classification and labelling regime is to help consumers navigate the market for sustainable investment products, to distinguish between:
- products based on their sustainability characteristics, themes, and outcomes
- different types of sustainable investment product
Sustainable investment products are structured around or pursue sustainability related characteristics, themes, or outcomes, while providing a financial return to investors. Consumer demand for these products is growing rapidly.
The FCA's latest Financial Lives survey shows that 81% of adults surveyed would like the way their money is invested to do some good as well as provide a financial return.
Firms are responding to this demand, according to Investment Association (IA) the UK market for UK domiciled responsible investment funds grew 64% over 2021 to reach £79 billion, far outstripping the 11% growth in UK domiciled funds overall.
However, consumers must be able to trust sustainable investment products and reasonably expect these products to contribute to positive environmental or social outcomes.