FCA has published guiding principles on the design, delivery, and disclosure of ESG and sustainable investment funds.
By Nicola Higgs, David Berman, Paul Davies, Anne Mainwaring, and Charlotte Collins
On 19 July 2021, the FCA published a letter sent to chairs of authorised fund managers, which sets out the regulator’s expectations regarding disclosures by funds that make ESG-related claims. The FCA aims to ensure that any ESG-related claims are clear and not misleading, both when a fund is applying for authorisation and on an ongoing basis.
The FCA has published these principles in response to the significant increase in funds applying for authorisation that have an ESG or sustainability focus. The FCA notes that applications are often poor quality and fall below its expectations, and many make claims that cannot be substantiated. The FCA observes that, in general, fund applications in this area often do not contain sufficient, clear information explaining their chosen strategy and how this relates to the assets selected for the fund.
On 9 November 2020, Rishi Sunak, Chancellor of the Exchequer, announced several initiatives designed to help the UK tackle climate change, while maintaining its position as an “open, attractive international financial centre” after the Brexit transition period ends.
On 5 August 2020, Global Investors for Sustainable Development (GISD) Alliance released to the European Commission their 
Companies are facing increasing pressure to report on environmental, social, and governance (ESG) matters in terms of their legal obligations, stakeholder pressure, and reputational issues. Companies are subject to both mandatory and non-mandatory non-financial reporting obligations. For the first time, in 2018, under the Non-Financial Reporting Directive (NFRD), certain companies must publish in their annual reports information relating to environmental, social, and employee matters, respect for human rights, and anti-corruption and bribery matters. The NFRD therefore bolsters existing mandatory disclosure obligations under the Modern Slavery Act 2015 and the Climate Change Act 2008. The forthcoming Conflicts Minerals Regulation will further strengthen these obligations.