On January 25 IIGCC responded to the Financial Conduct Authority's (FCA) consultation on Sustainability Disclosure Requirements (SDR) and investment labels.
The FCA’s recognition of the materiality of climate and wider sustainability factors for investment decision-making and capital allocation is welcomed by the institutional investment community. Decision-useful information on climate and wider sustainability-related issues will provide a basis for investors to act on this information and ultimately shift financial flows in line with the UK’s net zero commitment. However, while IIGCC acknowledges that many of the measures have been designed with retail investors in mind, it will be important to ensure that the needs of institutional investors are also accounted for.
One issue we wanted to highlight is the difficulty in applying the mutually exclusive “sustainable focus”, “sustainable improver” and “sustainable impact” labels to institutional investors, who will often seek to take a blended approach when pursuing sustainability objectives such as net zero alignment. We also wanted clarity on the expansion of the scope of the regime to overseas and pension products, and the definition of terms such as ‘unexpected investments’ and ‘credible standard’ of sustainability. It is also important that the FCA SDR uphold interoperability between the proposals and regimes in other jurisdictions, and avoids sequencing issues which undermine the flow of information across the investment chain in relation to its implementation.
DISCLAIMER:This consultation response was developed in collaboration with a number of IIGCC members but does not necessarily represent the views of the entire membership, either individually or collectively.