Whereas most fund managers have made efforts to adjust to the regulator’s expectations on the design, supply and disclosure of their ESG and sustainable funds, extra enhancements are wanted, the FCA says.
An FCA overview discovered proof of excellent apply on the event and use of acceptable ESG and sustainability scoring programs and benchmarks.
It additionally highlighted good apply the place managers performed thorough due diligence on third occasion information suppliers.
Nonetheless, the regulator discovered a number of examples of poor apply, notably across the disclosure and readability of knowledge given to retail buyers and shoppers.
Key ESG and sustainability info was typically not defined, put into context or included in disclosures. The end result was related info was not instantly or clearly accessible to buyers.
Merchandise have been additionally inconsistently aligned with their ESG and sustainability objectives even when they referenced them of their title.
In some cases, fund holdings appeared inconsistent with a fund’s ESG or sustainability goals and a few fund supervisor weren’t in a position to clarify how these investments fitted with their objectives.
The design of fund managers’ stewardship approaches additionally didn’t meet the FCA’s expectations.
The regulator stated it was typically tough to determine the precise purpose of the stewardship actions, how the actions have been aligned to fund goals and examples of the progress they made towards these goals.
The regulator stated it expects corporations to handle the nice and poor practices outlined in its report back to adjust to the Client Obligation.
The FCA revealed its overview immediately forward of its last guidelines and steerage on Sustainability Disclosure Necessities (SDR) and funding labels.
Camille Blackburn, director of wholesale buy-side on the FCA, stated: “The UK’s asset administration sector is world main and we wish to hold it that approach. The modifications we’re making to the regulatory regime by way of upcoming guidelines on labelling will assist retail buyers and shoppers perceive and be assured in understanding precisely what they’re investing in.
“Embedding the Guiding Rules and the nice apply we’ve got recognized in our overview will assist corporations to adjust to proposed new necessities underneath the SDR and funding labels guidelines, alongside their Client Obligation obligations.
“We anticipate boards to take the lead in monitoring and guaranteeing corporations make any modifications required to additional improve sustainability disclosures and practices.”