FCA ‘greenwashing’ consultation: Tumelo calls for compulsory disclosure of fund manager voting policies

by | Jan 26, 2023

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Investor voting fintech Tumelo is calling on investment funds to disclose to investors whether they permit them to vote the shares in their portfolios.

Responding to a Financial Conduct Authority (FCA) consultation on sustainable fund marketing and anti-greenwashing measures (CP22/20), Tumelo is highlighting the importance of transparency over pooled funds’ policies on asset owner voting. Asset owners are the retail or institutional investors in a fund.

Until recently, voting on key issues at shareholder meetings was done exclusively by fund managers, as the registered owners of the shares.

However, voting technology is empowering shareholders to have a voice on the issues they care about. It allows fund managers to either take account of investors’ wishes (known as ‘expression of wish’ voting), or even to allow investors a direct vote on board resolutions in the underlying companies held in the fund (pass-through voting).


Greenwashing concerns

The FCA is concerned firms are making exaggerated or misleading sustainability-related claims about their investment products, eroding trust in the market and potentially leading to consumer harm.

It is proposing to introduce measures aimed at clamping down on greenwashing, including launching three sustainable investment labels – sustainable focus; sustainable improvers; sustainable impact – to reflect the natures of funds in the space.


Tumelo is recommending that funds in each category should be required to disclose to investors what their policy is on allowing investor voting on shares. This should form part of pre-sale disclosure documents and fund managers’ annual reporting, it added.

Georgia Stewart, CEO and co-founder or Tumelo, said“Fund managers play at least two roles in society: they are capital allocators, and they are stewards of companies. Companies have amassed a huge amount of power over our political, social and environmental systems. As registered shareholders of these companies, fund managers play a lead role in influencing how they use that power, to achieve better long-term outcomes for their clients.

“Capital allocation – deciding which companies to invest in and which to side-line – has, for years, received all the focus from fund managers, clients and regulators alike, including the Sustainable Finance Disclosure Regulation. It’s time that regulators like the FCA gave due focus to the second and arguably most important role that fund managers play – that of stewards.


“In my opinion, this FCA consultation is about demanding transparency over questions that investors don’t know to ask or can’t ask, and that includes voting. Some fund managers are making use of new technologies to improve the services they offer to clients – effectively handing asset owners the choice to vote on how companies in their funds are managed. So, for example, an investor could fairly assume that the voting rights associated with their “sustainable investment” fund would be used in such a way as to promote positive environmental and societal outcomes in how companies invest and operate.

“However, many fund managers still do not offer this flexibility and most clients don’t know it’s on offer in other parts of the market. Because investors aren’t aware, they don’t ask; because investors don’t ask, fund managers assume there is no demand. This is a perfect case for greater transparency.”

The FCA’s consultation CP22/20: Sustainability Disclosure Requirements (SDR) and investment labels closed on 25 January, with final rules and guidance set to be published at the end of the first half of 2023.


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