FCA acts to help investors make more informed ESG investment decisions

The FCA is committed to helping investors put Environmental, Social and Governance (ESG) matters at the heart of their investment decisions.

To help enable this, the FCA is today publishing a Discussion Paper to coincide with COP26 Finance Day, inviting views on potential criteria to classify and label investment products. This will help consumers navigate their sustainability characteristics. The FCA is also gathering feedback on supporting entity-level and product-level disclosures. The FCA will leverage existing initiatives in this area to ensure coherence with market practice and other regulation. The input received will guide the FCA’s policy design in this area, ahead of consultation on new proposals in spring next year.

In its most recent Financial Lives survey, the FCA found 80% of respondents wanted their money to ‘do some good’, while also providing a financial return, 71% wanted to ‘invest in a way that is protecting the environment’ and 71% would not put their money into ‘investments which are unethical’.

If the financial sector is to respond effectively to this growing demand and help encourage positive change across the economy, consumers need high quality information and clear standards. And they need to be able to trust firms to deliver on their promises. The FCA encourages stakeholders to engage with the Discussion Paper so that it can design a disclosure and labelling system to achieve this.

Nikhil Rathi, Chief Executive of the FCA commented:

“It is vital that we innovate to support industry’s shift to a more sustainable future. That is why the FCA has been leading from the front. Developing consistent, trusted standards are a vital part of that, giving investors the confidence to put their money where it can deliver the most sustainable outcome.

“The strategy we have published today puts these standards front and centre, supported by supervision and enforcement where firms fail to meet them.”

The Discussion Paper forms part of the FCA’s new ESG Strategy released today. The strategy sets out the FCA’s critical role in supporting the transition to a more sustainable economy, working with industry, listed companies and international partners. Building trust and integrity in the market for ESG products, and ensuring transparency, are central to the strategy.

The FCA also underscores its commitment to continue embedding ESG considerations across its functions and expanding its resources and capabilities in this area. The FCA also lays out how it will build on its existing work to achieve the ESG outcomes in its latest Business Plan and keep pace with developments in this dynamic space.

Speaking at COP26, Nikhil Rathi will also announce that the FCA will confirm final rules, which align to TCFD standards, on disclosures for a wider scope of listed issuers, as well as asset managers, life insurers and FCA-regulated pension providers, by the end of 2021.