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FCA criticises fund managers for falling short of ESG compliance

While Authorised Fund Managers (AFMs) have made efforts to comply with the FCA’s expectations, further improvement is needed.

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The UK's financial regulator has said some firms are falling short on ESG compliance.

A review of ESG disclosures by the Financial Conduct Authority found Authorised Fund Managers (AFMs) need to improve to comply with expectations.

'The UK’s asset management sector is world leading and we want to keep it that way. The changes we are making to the regulatory regime through upcoming rules on labelling will help retail investors and consumers understand and be confident in knowing exactly what they are investing in," Camille Blackburn, Director of Wholesale Buy-Side, said.

Finalised rules and guidance on Sustainability Disclosure Requirements (SDR) and investment labels are set to be published soon.

But the FCA says it has found notable examples of poor practice including products "inconsistently aligned with their ESG and sustainability goals".

"In some instances, fund holdings appeared inconsistent with a fund’s ESG or sustainability objectives, and some AFMs weren’t able to explain how these investments fit with their goals," the FCA said.

'We expect boards to take the lead in monitoring and ensuring firms make any changes required to further enhance sustainability disclosures and practices," Blackburn said.

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