Environmental, social and governance | UK Regulatory Outlook November 2023

FCA review finds firms need to do more to embed ‘Guiding Principles’ for ESG and sustainable investment funds

A recent review conducted by the Financial Conduct Authority (FCA) found that further improvement is required by authorised fund managers (AFMs) to fully implement and comply with the guiding principles for ESG and sustainable investment funds. While the FCA found good practice among most AFMs, it also found examples of poor practice. This included products that were inconsistently aligned with their ESG and sustainability goals, as well as instances where ESG and sustainability information was not properly explained, put into context or included in disclosures - meaning relevant information was not clear to investors. The press release notes that the regulator will continue to monitor firms to ensure they, along with their investment products, are meeting its expectations. 

CFA Institute definitions for responsible investment approaches to avoid greenwashing

On 1 November 2023, the CFA Institute, Global Sustainable Investment Alliance, and Principles for Responsible Investment jointly published a set of definitions for the following key responsible investment terms: screening, ESG integration, thematic investing, stewardship, and impact investing.

The groups aim to provide harmonised definitions for use by investors, regulators, and governments. A previous report from the CFA found that inconsistencies in the meaning of ESG-related terms contributed to perceptions of greenwashing.

Please also see our new international ESG Knowledge Update, for a round-up of legal, regulatory and market news.