FTA: What have your members told you about their approach to non-labelled funds with sustainability characteristics?
CT: Our March 2024 survey of member firms found that 70 per cent with UK-domiciled funds, including those not intending to label any of their funds, will have non-labelled funds with additional disclosure requirements.
More than 300 funds will sit in the ‘non-labelled funds with sustainability characteristics’ bucket – expected to be more than double the number of funds with a ‘sustainability focus’ label.
The data provided to us by firms shows that there will be a diverse profile of funds required to produce the new consumer-facing disclosure documents, ranging from funds that market ESG integration and operating exclusions that have environmental and social drivers, to indexing funds and funds that may have many of the hallmarks of a sustainability focus fund but do not meet the 70 per cent threshold, for example.
In July, we held a workshop with experienced investors to understand how they wanted to engage with the content produced through the CFDs – if a fund does not have a label, it must state this in a prominent place.
We found that it is important for firms to communicate first what the fund is trying to achieve through its investment objective, and then to state that the fund does not have a label, otherwise investors may not engage further.
Another clear finding was that retail investors wanted detailed and clear explanations of why a fund might need to change name and sought reassurance over the validity of the original mandate.
FTA: If you were the FCA, is there anything you’d change about the new policy and its implementation?
CT: Overall, we support the goals of the SDR regime, and we are committed to working with industry and the regulator to ensure that it delivers for consumers, raises standards, and improves confidence in the market for sustainable investments.
The decision to extend, in a limited way, the December deadline for some applications has been welcomed across the industry, and we are confident that there is an emerging path to greater clarity on regulatory expectations on both sides.
We are hopeful that the new rules will eventually help consumers make more informed decisions, enhance the credibility of the sustainable investment market and support the UK’s position as a world-leading, competitive centre for asset management and sustainable investment.
