IA responds to FCA consultation on SDR and investment labels

January 26, 2023

In response to the FCA’s consultation on SDR and investment labelling, Chris Cummings, Chief Executive of the Investment Association (IA) has commented.

He said: “As demand for sustainable and responsible investment products grows, our industry recognises that we must continue to raise standards and improve consumer confidence in this area of the market.

“An effective retail labelling system and clear disclosures can play a valuable role in achieving this. While we commend the FCA’s positive work to date, we are concerned that without changes, the proposals will result in an approach that does not serve consumers effectively or facilitate the transition to a more sustainable future. Currently, the proposals contain aspects which are overly prescriptive and would exclude many existing funds, which are being sold legitimately to satisfied customers on the basis of a strategy related to responsible or sustainable investment.

“Investment managers are committed to working with the FCA to find a pragmatic solution which will set the bar right for the sustainability labelling system and disclosures and most importantly, provide the best outcome for consumers.”

The IA’s response highlights a number of key suggested changes that could make a positive difference to the effectiveness of the new SDR and investment labels framework, these include:

Adopt a pragmatic approach to agency and influence and move away from specific language on channels for investor contribution.

Introduce more inclusive and less prohibitive naming and marketing rules. Accommodate funds that invest in a blend of Improving and Focus assets within the Sustainable Focus label.

Incorporate new sustainability-related fund information into existing product disclosures.

Recognise current data and methodological limitations and allow firms to use internal frameworks as a credible standard for environmental and social sustainability.

Adopt a more pragmatic approach to Impact. Recognition of importance of cross-border distribution.