ESG Update: CCLA’s response to the FCA’s Sustainability Disclosure Requirements

Date: 14 Feb 2023

Silvia Ricciardi

UK’s largest charity fund manager CCLA supports the Financial Conduct Authority’s definition of a sustainable finance product.

CCLA has responded positively to the FCA’s consultation on sustainability disclosure requirements.

CCLA supports the Financial Conduct Authority’s (FCA) definition of a sustainable finance product as being one that ‘plausibly achieve(s) or encourage(s) positive sustainability outcomes’, and the attempt to limit the use of sustainable finance labels to products that can achieve positive ‘real-world’ impacts.

They believe that investors will benefit from further clarity about the ‘purpose’ of sustainable finance and that the proposed labelling regime has the potential to increase the effectiveness of sustainable finance in building a better world.

CCLA supports:

  • The intention to introduce sustainable finance labels and specifically, the three sustainable fund labels proposed.
  • The intention to only allow labels for funds that can ‘plausibly achieve or encourage positive sustainability outcomes’.
  • The proposed focus on ‘additionality’ within the consultation document because CCLA believes that asset managers’ approach to sustainability should be judged on the additional social or environmental impact that they, directly, intend to create.
  • The flexibility to reporting that is set out under the proposed regime.

Due to the structure of the industry, CCLA believes that the majority of asset managers – particularly those that operate ‘active’ funds – are not incentivised to treat ESG risks as being systematic and thus tackle them accordingly. They encourage the FCA to incentivise activities that tackle ‘systemic’ sustainability risks.

They would also welcome further disclosure of potential labelling standards for multi-asset funds and for the FCA to set out further information as to how a multi-asset fund could achieve a ‘sustainable finance label’.

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