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 observe on the event and use of applicable ESG and sustainability scoring methods and benchmarks.
It additionally highlighted good observe the place managers carried out thorough due diligence on third celebration knowledge suppliers.
Nonetheless, the regulator discovered a number of examples of poor observe, significantly across the disclosure and readability of knowledge given to retail traders and shoppers.
Key ESG and sustainability data was typically not defined, put into context or included in disclosures. The end result was related data was not instantly or clearly accessible to traders.
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 aims 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 establish the precise goal of the stewardship actions, how the actions have been aligned to fund aims and examples of the progress they made in opposition to these goals.
The regulator stated it expects corporations to handle the great and poor practices outlined in its report back to adjust to the Client Responsibility.
The FCA revealed its overview right now forward of its last guidelines and steering 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 need to preserve it that method. The adjustments we’re making to the regulatory regime by way of upcoming guidelines on labelling will assist retail traders and shoppers perceive and be assured in realizing precisely what they’re investing in.
“Embedding the Guiding Rules and the great observe now we have recognized in our overview will assist corporations to adjust to proposed new necessities underneath the SDR and funding labels guidelines, alongside their Client Responsibility obligations.
“We anticipate boards to take the lead in monitoring and making certain corporations make any adjustments required to additional improve sustainability disclosures and practices.”