(NEWSManagers.com)
– Sustainable funds yes, but sustainable made in the UK. The British financial market regulator Financial Conduct Authority (FCA) launched in the middle of last week a public consultation on its future rules and sustainability labels for local investment funds (Sustainable Disclosure Requirements
or SDR). This will continue until January 25, 2023 and
refined rules based on the responses received will be proposed by
the end of the first half of 2023. The primary goal for this future
regulation is to protect the individual investor against the risks of greenwashing
in so-called sustainable funds in Great Britain. It will not be effective
before June 30, 2024, and its rollout will be delayed until 2026.
Foreign funds are not covered by the consultation
but the FCA will undertake further consultations to determine how
apply future rules to them.
The FCA is aware that it will introduce a
additional dose of complexity in the regulatory ecosystem
existing in this area, already ambiguous for asset managers
like regulators. It says it is ensuring consistency between its future rules and those already in place in Europe – the Sustainable Finance Disclosure Regulation (SFDR), Level 2 of which comes into force on 1 January 2023 – and those coming from the US regulator Securities and Exchange Commission.
However, the content of the hearing clearly shows that they
sustainability criteria for UK funds will get closer
American and European criteria.
And for good reason, unlike the SFDR, the regime
intended does not require publication of information on the most important
the funds’ negative effects (main negative effects) or theirs
alignment with the future UK green taxonomy, not proportional either
of sustainable investments. With regard to its local version of the European regulation Priips, where the performance scenarios of the funds disappeared from
prospectus, the United Kingdom embraces European elements that it considers
too restrictive. The FCA says it will update its criteria for
publication of information in line with developments in
standards from the International Sustainability Standards Board.
“If our diet is compatible with
European and American regimes, our starting point is different. Our
the logic behind product categorization is to help
consumers to identify sustainable investment products and to
find around the market. Our criteria are thus designed for
set the bar very high for products that claim
sustainability, which is important to help combat
greenwashing in connection with a trust issue. Point off
the departure of the European and American regime was on the contrary
categorize products mainly to determine the requirements for
publication”, emphasizes the FCA, which is also ready to accept
consider the rules that will develop in others
markets if these become important to the UK market.
By implication the emerging countries, especially China.
Three categories
This English SFDR is based on five principles:
a sustainability objective, the investment policy and strategy,
the performance of key measurements (greenhouse gas emissions
among other measurements), the implemented resources and the management
as well as the investor’s policy for shareholder involvement (stewardship).
Three categories of sustainable labeling are
possible for funds. SFDR articles 8 and 9 funds may
soon to oppose the foundations’ sustainable focus, sustainable improvements and sustainable impact. The first category – sustainable focus
– will include funds for which at least 70% of the assets are considered adjusted
on a credible standard in relation to sustainability in terms of
environmental and/or social, as well as means that highlight a
specific environmental or social theme (circular economy at
example).
Means with the label sustainable improvement means
will have to invest in assets that have the potential to become more
socially or environmentally sustainable over time. Compared to
sustainable impact funds, they must be able to
to achieve a pre-defined, positive and measurable result in the world
real on the environmental and/or social aspect.
Categorization promises to be as chaotic as SFDR’s
as it will be up to each manager to classify his products himself
durable and to ensure that classification is appropriate. “Unit
fund approval will review and may be challenged
categorization of any new funds submitted for approval.
However, this will not be a brand endorsement,” warns the FCA.
An average adaptation cost estimated at £604,000 for managers
Other documentation rules
pre-contractual and marketing as well as on the annual reporting of
sustainable means are disclosed in the consultation. If they have
funds labeled or not, the trustees must publish a report
on how their entities manage the risks and opportunities associated with
durability. The FCA is considering a date of 30 June 2025 for
first reports from companies managing £50bn of assets
or more and on 30 June 2026 for those managers whose
outstanding is less than DKK 50 billion. but greater than 5 billion
books. The FCA further proposes to restrict the use of terms
related to sustainability in naming and marketing of
products offered to retail investors who would not use
sustainable investment brand.
The regulator estimates the amount of this future
regulation for asset managers, advisers and trading platforms
distribution of local funds is spread over 146.7 million pounds
(€169 million) of non-recurring costs and £26.7 million (31
million euros) of current costs. For an asset manager
British, the average bill would amount to £604,000 as a
adaptation costs and DKK 239,600 in the form of ongoing costs
yearly.
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