UK FCA Publishes Consultation Paper on Sustainability Disclosure

17 November 2022
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Key Takeaways:
  • The FCA has recently published a Consultation Paper on Sustainability Disclosure Requirements. The draft rules share some parallels with the EU Sustainable Finance Disclosure Regulation but also introduce a retail consumer-facing product “labelling” regime alongside the separate product-level disclosures. The draft rules, which will be published in final form by 30 June 2023, will only apply to UK firms.
  • Under the draft rules, where a product meets specific qualifying criteria, firms may use the new sustainability “labels” for the product. In practice, firms will use these “labels” when marketing to retail investors because if it does not use the “labels”, then it may not use the word ESG or common names in the naming and marketing of the product.
  • The draft rules also introduce sustainability disclosure requirements. These include consumer-facing disclosures for retail investors, summarising how the product will pursue and measure sustainability objectives; pre-contractual disclosures that will provide institutional and retail investors with further information on the investment policy, scope of investments and target asset composition; sustainability product reports containing ongoing sustainability-related information; and a sustainability entity report covering the firm’s approach to sustainability governance.