UK sustainability reporting – IIGCC responds to FCA discussion paper


The Financial Conduct Authority (FCA) – the UK’s financial services regulator – published a Discussion Paper in November 2021, seeking views and input from industry experts on proposed new sustainability disclosures for asset managers and FCA-regulated asset owners, as well as a system for labelling sustainable investment products. The proposals form part of the Sustainable Disclosure Requirements (SDR) to be implemented across the economy and set out in the UK government’s sustainable investing roadmap, published in October 2021. 

As the leading European membership body for investor collaboration on climate change, and with more than half of our 370+ members based in the UK, IIGCC is keen to ensure that our members’ voices are heard as these requirements are developed. Following consultation with a number of our members, we submitted a response to the Discussion Paper in early January, welcoming the FCA’s proposals for comprehensive sustainability reporting standards and product labelling and providing some key feedback at this critical early stage of the process. 

The proposals set out in the FCA’s paper will help investors and their clients to with a more holistic understanding of how sustainability risks and opportunities are identified and managed, and we are pleased to see the role that investors can play in allocating capital to transitioning sectors recognised in the materials. The FCA’s commitment to build on existing requirements and ensure consistency with measures in place elsewhere in the world is also helpful, not least because many investors are operating internationally and already aligning with those requirements. 

However, there are several areas where our members believe that further refinement of the proposals are necessary to ensure that they are fully fit for purpose prior to implementation. These include ensuring that investors of all types are able to access consistent sustainability information which allows them to make effective investment decisions. 

When it comes to sustainable product labels, we encourage the FCA to avoid binary distinctions between ‘transitioning’ and ‘aligned’ investments, and to foster an enabling environment to increase investment in the companies whose transition is most essential for reaching net zero. It is important that the FCA includes clear definitions for any labels so that investors can use them appropriately to support their clients’ understanding of a product’s objectives and holdings. 

Finally, it is key that learnings are taken from the implementation of SFDR and other similar sets of requirements, avoiding the replication of these challenges in the UK context and ensuring appropriate sequencing of regulatory requirements – i.e. that corporate disclosure is required before investment product reporting begins. 

IIGCC’s full response to the discussion paper is available here