07 June 2022
4 min read
The Roadmap to ESG - Part 7
An updated version of the FCA’s ‘A strategy for positive change: our ESG priorities’ was published in November 2021, ahead of the United Nations Climate Change Conference (COP26).
Fund groups and asset managers in the UK are currently preparing for the introduction of the Sustainability Disclosure Requirement (SDR) rules, seen as the UK’s response to similar EU regulation. The creation of an investment labelling system is a positive move towards addressing advisers’ frustrations with a lack of consistency and clear standards.
Alex Reynolds, Advies Private Clients
While it doesn’t list rules for financial advisers, the FCA’s paper does give strong indications as to the direction of travel. It expects advisers to “understand investors’ preferences on sustainability to ensure their advice is suitable.”
Adrian Murphy, Murphy Wealth
The advisers we spoke to for this series also expect more guidance on reporting and monitoring of how client preferences on sustainability are established and recorded. As we discussed in step five, firms can prepare by taking steps to document the client conversation or established hierarchy of preferences with regard to sustainability and other investment objectives.
Stuart Harding, Attivo Group
Something that stood out from our research with financial advice professionals was the strong focus for ESG to be about ‘green’ issues, fuelled by climate change and the need to have a more sustainable world.
While this is an important issue, ESG is more than this and the social aspect (the ‘S’ in ESG) is something the FCA says it is keen to see addressed by the entire financial services industry.
The FCA paper states that they are “committed to building resources and capabilities on ESG beyond climate change, and ensuring that our regulation takes a broader ESG perspective”. They list diversity, culture and purpose, as well as governance as areas they will leverage, which means any organisation within the financial advice chain will need to look to their own working practices, as well as being mindful of the practices of the organisations they work with or invest in.
It’s clear from the research we’ve carried out for these articles and the broader research carried out by NextWealth with financial planners that the advice profession is moving towards embracing ESG with increasing urgency.
What is also clear is that this new focus brings with it many challenges and no firm we have spoken with feels they are anywhere near completing their ESG journey.
Follow us on LinkedIn for our final article where we summarise what we’ve discovered and highlight some of the key learnings, hopefully providing food for thought for any advice firm that is actively looking to make ESG an integral part of their offering.