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 evaluation discovered proof of excellent observe on the event and use of acceptable ESG and sustainability scoring methods and benchmarks.
It additionally highlighted good observe the place managers performed thorough due diligence on third celebration knowledge suppliers.
Nevertheless, 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 info was typically not defined, put into context or included in disclosures. The consequence was related info was not instantly or clearly accessible to traders.
Merchandise had been additionally inconsistently aligned with their ESG and sustainability targets even when they referenced them of their identify.
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 targets.
The design of fund managers’ stewardship approaches additionally didn’t meet the FCA’s expectations.
The regulator mentioned it was typically tough to determine the precise intention of the stewardship actions, how the actions had been aligned to fund aims and examples of the progress they made in opposition to these goals.
The regulator mentioned it expects companies to deal with the nice and poor practices outlined in its report back to adjust to the Shopper Obligation.
The FCA revealed its evaluation as we speak forward of its closing guidelines and steerage on Sustainability Disclosure Necessities (SDR) and funding labels.
Camille Blackburn, director of wholesale buy-side on the FCA, mentioned: “The UK’s asset administration sector is world main and we wish to preserve it that manner. The modifications we’re making to the regulatory regime by upcoming guidelines on labelling will assist retail traders and shoppers perceive and be assured in figuring out precisely what they’re investing in.
“Embedding the Guiding Rules and the nice observe we’ve recognized in our evaluation will assist companies to adjust to proposed new necessities below the SDR and funding labels guidelines, alongside their Shopper Obligation obligations.
“We anticipate boards to take the lead in monitoring and making certain companies make any modifications required to additional improve sustainability disclosures and practices.”