SBAI Response to FCA DP 21-4 - Sustainability Disclosure Requirements (SDR) and Investment Labels

We have responded to the FCA's Disucussion paper on Sustainability and Investment Labels. In this response provide comments on the proposed labeling, entry level criteria and highlight some of the jurisdictional and asset class-based challenges that asset managers might encounter.

FCA’s Discussion Paper on Sustainability and Investment Labels.

As part of our mission to increase collaboration between asset managers and institutional investors to improve industry outcomes, we have a dedicated Responsible Investment and Diversity Working Group. Using the outcomes from discussions within this group we have responded to the FCA’s discussion paper and highlight the following key points:

  • Investment Label Criteria: We believe that criteria based on the sustainability objectives of the product (including details of how these will be measured) would be more appropriate than relying solely on the proportion of sustainable assets.
  • Sustainable – Transitioning Label: We believe this should not include an assumption that the proportion of sustainable assets will increase over time and should be flexible enough to encompass portfolios that have an objective to invest in “brown” assets and move them to “green”.
  • Responsible Label: We believe the FCA should consider not continuing this label. We believe it would be more appropriate to label funds with sustainability objectives and allow all others to be categorised as “Not promoted as sustainable”.
  • Entity Level Criteria: We do not believe that the firm should have to meet criteria relating to its overall investment process for a product to be labelled as sustainable. The investment process for the specific product should meet the criteria but the firm may have other products that are not promoted as sustainable and therefore would not have the same investment process.
  • Challenges: we provide some details of the jurisdictional and asset class-based challenges that some asset managers may encounter. We would be happy to discuss these further if it would be useful.