ESG – FCA publishes sustainable finance strategy and DP on disclosures

On 3 November 2021, in a move not wholly unconnected with the ongoing COP26 conference in Glasgow, the FCA published two important ESG-related documents:

• its sustainable finance strategy and
• a discussion paper (DP21/4) on sustainability disclosures and labels for investment products

DP21/4 closes for comments on 7 January 2022.

Our summary

• of the sustainable finance strategy paper can be found here; and
• of the FCA discussion paper can be found here.

By way of an overview of each document:

Sustainable Finance Strategy

The FCA's sustainable finance strategy is based on five core themes,

• Transparency;
• Trust;
• Tools;
• Transition; and
• Team

reflecting the priorities set out in its feedback statement FS19/6.   

Today's publication is intended to provide a high-level overview of the FCA’s ESG strategy, setting out the outcomes it is aiming to achieve and the strategic themes and key actions it expects to take in order to deliver these. While the FCA will pursue its strategy over a number of years, a supplemental publication sets out certain interim milestones in the coming period.

Discussion Paper on sustainability disclosures and labels for investment products

The UK Government's recent publication, "Greening Finance: A Roadmap to Sustainable Investing" (see our summary here) set out detail about what the financial services industry in the UK should expect to see coming its way over the next couple of years.

This included a roll out of economy-wide Sustainable Disclosure Requirements (SDR), building on the UK's Task Force on Climate-Related Financial Disclosures (TCFD) implementation and covering

• disclosure by corporates;
• disclosure by asset manager and asset owners as to how they take sustainability into account; and
• investment product disclosures.

The aim is for the SDR to use the same framework and metrics across the economy in order to ensure a clear and direct link from investors, through the financial system to the businesses they are invested in and their relationship with the environment.

In addition, metrics will be drawn from international standards, where they exist, to support international compatibility.

Today's DP, then, marks the opening of a conversation about what disclosures asset managers should be required to make as part of this process.

The DP closes on 7 January 2022.