Getting around the ESG landscape: What can asset managers expect in the upcoming year?


INSIGHT
Published
Feb 5th '24
Share
Facebook

For those in the sustainable finance industry, “I have too many books on my reading list” is a common refrain, and it’s not hyperbole. A significant increase of acronyms, technical words, working papers, consultation papers, legislation, and general material pertaining to sustainability has been seen during the last three years.

 

2023 was no different: the UK published the Sustainability Disclosure Regulation (SDR) and investment labels regime, the EU’s Sustainable Finance Regulation (SFDR) may be completely redesigned, as evidenced by numerous consultations, and the world appears to be finally coming together behind an ISSB-based common reporting framework, with future expansions prompted by the Taskforce for Nature-related Financial Disclosures (TNFD) awaiting implementation.

 

To help you stay on top of your ever-growing reading list, we break down what’s in store for UK asset managers in the ESG field in this blog!

 

Attention to reporting and climate

This June, smaller asset managers in the UK will submit their first entity- and product-level reports under the Taskforce for Climate-related Financial Disclosures (TCFD). The primary obstacle stemming from some asset classes’ limited data availability—such as multi-asset, fixed income, or private equity—means that in order for businesses to comply with the FCA’s regulations, their reporting must be in line with both guidelines and TCFD recommendations. While compliance with these criteria is expected for this initial disclosure cycle, organisations who effectively integrate climate-risk into their business plan during the 2024 reporting period would benefit from better developed methods.

 

The interpretation of scenario analysis’s quantitative results and their incorporation into actual product and firm-level decision-making both need significant improvement, in our opinion.

 

This suggests that in order for listed asset managers to support their net zero pledges with credibility, they may need to start considering more comprehensive sustainability disclosures and particular transition strategies. On the former, the FCA anticipates opening public comment in 2024 about the TCFD regulations’ expansion to include general sustainability subjects in compliance with ISSB standards IFRS S1 & IFRS S2. A particular clause outlining the FCA’s requirements for the disclosures made by listed businesses on their transition plans will also be included in relation to the latter.

 

Given the prevalence of net zero objectives, the regulator looks for proof that listed businesses are taking concrete steps to reach them. In this field of study, we anticipate that the Transition Planning Taskforce framework will be an important resource.

 

Enhancing Inclusion, Equality, and Diversity while promoting healthier cultures

In 2024, DEI will continue to prioritise promoting healthy cultures and enhancing diversity, equality, and inclusion. In H2 2024, the FCA is anticipated to release a Policy Statement that will address target-setting, policy and strategy development, and the required reporting of D&I data for bigger enterprises. Additionally, the Policy Statement will complete the formal integration of non-financial wrongdoing into the current suitability threshold criteria, fit and suitable evaluations, and conduct regulations.

 

Introduction of Investment Labels and the new Sustainability Disclosure Requirements (SDR)

In 2024, the FCA will implement the SDR system and the anti-greenwashing regulation. To start, we recently wrote a blog post exploring the connections between the greenwashing law and businesses’ responsibilities under the Consumer Duty. The Financial Conduct Authority (FCA) strives to ensure that any statements made about your goods are truthful, transparent, and not deceptive. The guideline applies to all types of communication, from website pictures to more focused marketing pieces, therefore you will need to be able to provide solid proof to support any of them.

 

Being able to substantiate any sustainability claims made about a company’s goods and services with solid, reliable proof is crucial in this crucial aspect of the SDR regime as a whole.

 

Aside from this, asset managers must ensure that they have sufficient governance frameworks in place, with qualified personnel monitoring the advancement of their branded products towards the accomplishment of sustainable goals. Strong engagement tactics, workable escalation plans, and proactive progress towards defined, quantifiable goals—all demonstrated through various kinds of periodic reporting—will be necessary due to the particular needs of the FCA.

 

This year presents a good deal of obstacles once more. If the landscape seems overwhelming, we would love to talk about how your company might approach, prioritise, or reevaluate its duties and responsibilities towards sustainability. We can also make sure you have the proper monitoring, reporting, and methods in place to demonstrate compliance. Let us if you’d like to talk!

 

If you have any queries about Compliance impacts on the ESG space,

please contact us.

 

Read:

 

About us

The Compliance workload shows no signs of decreasing. An ever-growing list of requirements and regulatory changes makes the compliance role harder than ever.

 

When you face business or regulatory challenges, we provide solutions including ESG support which are tailor-made to your needs with a view to releasing your energies to focus on your clients.

 

LS Consultancy offer a complete solution with a range of cost effective, regulatory compliance and marketing products and solutions including copy advice and copy development which are uniquely suited to supporting firms.

 

Explore our full range today.

 

Contact us

 

Why Not Download our FREE Brochures! Click here.

 

Call us today on 020 8087 2377 or email.

 

Need A Regulatory Marketing Compliance Consultant? A Bit More About Us

 

We welcome individual bloggers / Professional Writers / Freelancers to submit high quality contents. Find out more…

 

Contact us

 

FOLLOW US

Connect with us via social media and drop us a message from there. We’d love to hear from you and discuss how we can help.

 

Facebook | Instagram | LinkedIn | X (formally Twitter) | YouTube

 

Contact us