Smooth implementation of the regulator's proposed sustainability rules will be a key focus for investment trade bodies in the new year, as they warn some firms will need to "clean up their act" under the "robust and rigorous regime".
Both the Investment Association and the Association of Investment Companies said they fully supported the long-anticipated SDR regime and recognised the role managers played in delivering the transition to net zero.
Now, attention was turning to how to put the rules in place.
The Financial Conduct Authority’s rules on greenwashing and sustainability labels, which are set to be rolled out in 2024, include an anti-greenwashing rule for authorised firms, four investment labels and rules around the marketing of investment funds on the basis of their sustainability characteristics.
Chris Cummings, chief executive of the IA, said: “The FCA’s long-anticipated SDR and investment labels regime has brought clarity to investment managers on the regulator’s expectations for this important area of the fund market, and we fully support the aim to bring greater transparency and comparability to sustainable investment, which will help investors make informed investment decisions.
“From our perspective, the next steps will include a smooth implementation of SDR for our members and spotlighting what our firms need to know and understanding our clients’ needs as we adopt the FCA’s updated regulation.”
Nick Britton, research director of the AIC, said the regime had come at a good time as its own research found a lack of trust in the sustainability claims of funds.
Its ESG Attitudes Tracker research earlier this year found three-quarters of advisers (76 per cent) thought greater transparency was needed around how ESG raters score funds.
Britton said: “Unfortunately, environmental, social and governance ratings were more likely to be seen as part of the problem than the solution.
“So the FCA’s release of its SDR and labelling regime couldn’t be more timely."
He said he expected to "hear a lot more about this in 2024", as asset managers and investment companies get to grips with the requirements, warning "those who have been more creative about their sustainability credentials will need to clean up their act, as this looks like a robust and rigorous regime.”
Cummings added the regime would only be successful if there was ongoing international cooperation.
“International consistency and collaboration are crucial to the success of any disclosure requirements, we will also be keeping a close eye on the EU’s Sustainable Finance Disclosure Regulation and any potential changes under new leadership.”
tara.o'connor@ft.com
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