The FCA has set out good and poor practices for asset managers to consider in relation to funds with ESG or sustainable characteristics.

By Nicola Higgs, Anne Mainwaring, and Charlotte Collins

On 16 November 2023, the FCA published the findings from its review of how asset managers have been embedding current regulatory expectations regarding the design, delivery, and disclosure of funds marketed as having ESG or sustainable characteristics.

With the FCA yet to finalise its Sustainability Disclosure Requirements (SDR) and investment labelling regime, it reviewed authorised fund managers’ (AFMs’) compliance with existing regulatory requirements, including the Guiding Principles set out in the Dear Chair letter issued in July 2021 (see this Latham blog post). The recently implemented Consumer Duty has added an extra dimension for AFMs to consider since the Guiding Principles were issued. The FCA highlights that the consumer understanding outcome is particularly relevant for AFMs providing ESG or sustainable funds; under this outcome, firms need to provide investors with the information they need at the right time and present it in a suitable way.