Asset Management

Issue 1134 / 4 November 2021

Investment Association

Discretionary investment management - IA publishes model agreement - 4 November 2021

The Investment Association (IA), in cooperation with Norton Rose Fulbright LLP, has published the third version of their model investment management agreement template for use by its members.

The Investment Association/Norton Rose Fulbright: Model Discretionary Investment Management Agreement (V 3.0)

International Organization of Securities Commissions

Recommendations on sustainability-related practices in asset management - IOSCO publishes final report - 2 November 2021

The International Organization of Securities Commissions (IOSCO) has published the final report on its recommendations on sustainability-related practices, policies, procedures and disclosure in asset management.

The report sets out five recommendations for securities regulators and policymakers, covering the following areas: (i) asset manager practices, policies, procedures and disclosure; (ii) product disclosure; (iii) supervision and enforcement; (iv) terminology; and (v) financial and investor education. It refers to the need to address the challenges associated with the lack of reliability and comparability of data at the corporate issuer level and the environmental, social and governance (ESG) data and ratings provided by third-party providers in order to enable the investment industry to evaluate sustainability-related risks and opportunities.

IOSCO will publish a separate report later in November covering ESG data and ratings providers.

IOSCO final report on recommendations on sustainability-related practices, policies, procedures and disclosure in asset management

Press release

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Sustainability disclosures - IOSCO publishes speech by chair of sustainable finance task force - 4 November 2021

IOSCO has published a speech by Erik Thedéen, the chair of IOSCO’s sustainable finance task force, on sustainability disclosures. The speech, given by Mr Thedéen at the Green Horizons Summit, an event at COP26 focusing on mobilising private capital as part of the energy transition, centres on the need to combat ‘greenwashing’.

Mr Thedéen calls for greater transparency in the criteria used for ESG ratings and in the marketing of ESG products by asset managers. In this regard, he praises the establishment of a new International Standard Setting Board under the supervision of the International Financial Reporting Standards Foundation as a key step in replacing the “alphabet soup” of voluntary sustainability disclosures and combatting greenwashing (see item above).

COP26: Green Horizons Summit: Remarks by Erik Thedéen, Chair IOSCO Sustainable Finance Task Force, Glasgow, 4 November 2021

Financial Conduct Authority

Sustainable Disclosure Requirements and Investment Labels – FCA publishes Discussion Paper (DP21/4) 3 November 2021

The FCA has published a discussion paper (DP21/4) seeking initial views on sustainability disclosure requirements (SDRs) for asset managers and FCA-regulated asset owners, as well as a new classification and labelling system for sustainable investment products. It forms part of the SDRs trailed in the government’s paper, ‘Greening Finance: A Roadmap to Sustainable Investing’, published in October 2021.

The FCA welcomes moves within the market towards greater focus on sustainability and other ESG factors, but expresses concern about the risk of harm to consumers in the absence of adequate regulatory standards. In particular, it notes that the “rapid recent growth” in a largely unregulated field poses a “risk that consumers become confused … and are unable to assess product suitability”. To this end, the Discussion Paper seeks feedback on potential approaches to the design of sustainable investment labels; consumer-facing disclosures for investment products; and client- and consumer-facing entity- and product-level disclosures by asset managers and FCA-regulated asset owners.

The SDR regime would build on measures already taken or underway to implement disclosure rules aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) across the economy, expanding the scope to cover wider sustainability topics beyond climate change. SDRs will also include disclosure requirements relating to the forthcoming UK Green Taxonomy. The global baseline sustainability reporting standards to be developed by the International Financial Reporting Standards Foundation's International Sustainability Standards Board will form a core component of the SDR framework.

The proposals regarding sustainable investment labels would complement the entity- and product-level SDR disclosures. The FCA will develop and implement the labels, building on existing work under other domestic and international initiatives by industry and official sector initiatives.

The FCA asks for comments on the Discussion Paper by 7 January 2022. It will consult on the proposed rules implementing the SDRs and sustainable investment labels in the second quarter of 2022.

Discussion paper: Sustainability Disclosure Requirements (SDR) and investment labels

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Press release