Interactive Investor

Regulator wants companies to fess up climate credentials

22nd June 2021 12:53

Myron Jobson from interactive investor

interactive investor comments on new FCA proposals on climate-related disclosure rules for listed companies and certain regulated firms.

The Financial Conduct Authority (FCA) has today published new proposals on climate-related disclosure rules for listed companies and certain regulated firms.

In the consultations the FCA is proposing: 

•    to extend the application of its TCFD-aligned Listing Rule for premium-listed commercial companies to issuers of standard listed equity shares 
•    to introduce TCFD-aligned disclosure requirements for asset managers, life insurers, and FCA-regulated pension providers, with a focus on the information needs of clients and consumers

On listed companies, Lee Wild, Head of Equity Strategy, interactive investor, says: “A key theme of the 2021 AGM season has been the rise in environmental-related issues on the table.

“Our research suggests that the environment is up there with CEO pay in terms of engaging private investors. But they need to know more about what companies are doing on what is a crucial issue of our time. No one wants to wait until there has been an environmental disaster before poor practice is laid bare. 

“Disclosure matters. ESG issues are bread and butter for many investors, and certainly should be up there with portfolio information. A woeful disregard for ESG issues can have a very damaging impact on a share price – investors need to be able to take a view, both morally and pragmatically in terms of their portfolio.

“But it needs to be plain and simple, and in a prominent place in a report and accounts and the website – not buried at the end. Otherwise, this is a wasted opportunity. 

“We welcome the Association of Investment Companies (AIC) new ESG disclosures for members on AIC members’ profile pages and appear alongside existing information such as performance data and portfolio holdings.”

Commenting more broadly, Becky O’Connor, Head of Pensions and Saving, interactive investor, says: “A rising tide lifts all boats and better transparency and reporting is key to making all of our investments greener, not just those with a green label.

“Greenwash is a threat to the growth of investments that genuinely reduce global carbon emissions and the only antidote is to standardise the measures used and the methods of disclosure.

“Climate reporting is a new area of scrutiny for the City regulator and it is no doubt on a steep learning curve. But it makes sense for responsibility for these rules to fall to the FCA, if climate risks are to be truly embedded and properly considered alongside other kinds of risk in all areas of the investment industry, not just within siloed sustainability teams.

“There is demand for better information on this area from retail investors, some of whom remain cynical about the impact that money can have. Ratings, measures and better reporting will help to give confidence.”

Commenting, Myron Jobson, Personal Finance Campaigner, interactive investor, says: “More and more people want to get ethical with their investments, but the current regime of climate related disclosure as well as the availability of data related to broader environmental, social and corporate governance (ESG) considerations are simply not up to scratch. 

“The challenge for the city watchdog is coming up with a robust set of disclosure requirements that are consistent, comparable, and hold up to scrutiny.

“The FCA’s focus on climate change is indicative of the unbundling of climate change from other ESG factors. Given the physical and transitional climate-related risks on many businesses, there is a growing sentiment that climate action has outgrown the ESG mandate – but it’s important that we don’t lose sight of wider governance issues too.”

To help match ethical investors with solutions that align to their morals, interactive investor publishes a long list of more than 140 socially responsible and environmental funds, investment trusts and ETFs available on the platform, broken down into three interactive investor ACE investment styles: Avoids, Considers and Embraces, to help investors navigate the list.

ii also offers an ethical rated list, called ACE 40, an ethical ready-made growth portfolio as well as a sustainable Quick Start Funds range to help people who are less confident get started.

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