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UNITED KINGDOM: FCA guiding principles on design, delivery and disclosure of ESG and sustainable investment funds

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The FCA have published a letter to the chairs of authorised fund managers setting out their expectations on the design, delivery and disclosure of environmental, social and governance (ESG) and sustainable investment funds.

The FCA receive a high volume of applications for authorisation of funds with a sustainable focus. However, many of these applications are poor-quality and fall below their expectation. The FCA states that they also expect clear and accurate ongoing disclosures to consumers where funds make ESG-related claims.

The FCA have developed a set of guiding principles, informed by broad stakeholder liaison and consumer research, to help firms apply wit existing rules. The guiding principles are there to ensure that any ESG-related claims are clear and not misleading, both at the time of application and on an ongoing basis, so that consumers can make informed choices.

The FCA have also stated that they will continue to scrutinise and challenge firms on their fund strategies and disclosures and to ensure that documentation submitted to us for authorisation meets our regulatory requirements.

The guiding principles are relevant where an FCA authorised investment fund pursues a responsible or sustainable investment strategy and claims to pursue sustainability characteristics, themes or outcomes. These principles are targeted at funds that make specific ESG-related claims, not those that integrate ESG considerations into mainstream investment processes.

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