Advisers will have an important role in displaying and communicating the regulator's new SDR labels, the FCA has said.
Presenting at ESG Accord's webinar Mastering the SDR on Monday (September 30), Louisa Chender, technical specialist in ESG policy at the FCA, said advisers will be expected to communicate a fund's sustainability label to their clients and ensure the information is being kept up to date.
But she said this did not include the more detailed disclosures fund firms will be producing alongside their consumer facing marketing material.
She said: "As advisers, you will have an important role to play in displaying or otherwise communicating the labels to consumers via your usual channels of consumer communication and also providing access to the consumer facing disclosure.
"You'll need to ensure that the labels and the consumer facing disclosure are kept up to date with any changes that the firm might make."
Under the new SDR naming and marketing rules, which come into force in December, fund houses wishing to offer ESG strategies will need to apply one of four sustainability labels to their funds:
- Sustainability Focus - At least 70 per cent of a product's assets must invest in assets that are environmentally or socially sustainable;
- Sustainability Improvers - Products investing in assets that may not be sustainable now but have an aim to improve their sustainability over time;
- Sustainability Impact - Products investing in solutions to problems affecting people or the planet to “achieve pre-defined positive measurable impact”;
- Sustainability Mixed Goals - Products investing in a mix of assets that either focus on sustainability, aim to improve their sustainability over time, or aim to achieve a positive impact for people or the planet.
Chender said these labels will be expected to be displayed prominently "on what we've described as a relevant digital medium for the product".
This means a fund's product web page or a page in a mobile app.
The consumer facing disclosure will include the label itself and a very short descriptor telling consumers what the label means.
It will also contain a brief summary of the sustainability goal, investment approach and KPIs, which will be updated annually and demonstrate progress towards the objective.
Chender said: "I should also note that firms will be producing more detailed disclosures, but the consumer facing disclosure will include links to those, so as advisers you're not required to do anything specifically related to them for SDR purposes."
She added: "And although the consumer facing disclosures have been designed for retail investors, the short, simple, accessible nature of the disclosures should mean that they provide a baseline of accessible information for advisers too."
Lee Coates, director of ESG Accord, said the labelling regime was "great news for advisers".
"I really believe that the disclosures are going to be a big help with due diligence," he said.
"So in the past, and you've seen all this, fund managers could use any name for their fund, come up with any description of what they do in sustainability or ESG, and then throw in lots of pictures of wind turbine solar panels or happy, smiling people.
"But under SDR, the disclosures will mean that advisers can can compare like with like consumer duty obligations as well, because you can demonstrate a direct link between the clients' investment preferences and objectives and the sustainability objectives of the fund.
"So it's great news for advisers."
carmen.reichman@ft.com
