The regulator is providing temporary flexibility in light of concerns that asset managers need extra time to prepare.
By Nicola Higgs, Jaime Martin, Sara Sayma, and Charlotte Collins
On 9 September 2024, the FCA published a statement on its naming and marketing rules under the Sustainability Disclosure Requirements (SDR) regime, allowing asset managers more time to get ready for the new requirements.
The SDR is being implemented on a staggered basis; the new investment labels have been
The proposal would establish stricter oversight of certain transactions and responds to concerns that large asset managers may be exerting influence on FDIC-supervised institutions.
By Arthur S. Long, Pia Naib, and Deric Behar
On July 30, 2024, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved a Notice of Proposed Rulemaking to amend the agency’s regulations under the Change in Bank Control Act1 (the Proposal)2. The Proposal would require advance notice to
The FCA’s long-awaited regime seeks to raise standards, increase consumer understanding, and reduce instances of greenwashing.
By Paul A. Davies, Laura N. Ferrell, Sarah E. Fortt, Nicola Higgs, Betty M. Huber, James McCrory, Nell Perks, Michael D. Green, Clare Scott, James Bee, Anne Mainwaring, Jaime Martin, Ella McGinn, and Charlotte Collins
On 28 November 2023, the FCA published its Policy Statement (PS23/16) containing final rules on its Sustainability Disclosure Requirements (SDR) and investment labelling regime. The FCA originally consulted on this regime in October 2022 (see this Latham blog post). Publication of the final rules was somewhat delayed in light of the volume of feedback received to the consultation.
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.
The Commission has clarified requirements for financial product classifications and the definition of “sustainable investment” under the SFDR.
By Paul A. Davies, Nicola Higgs, Michael D. Green, Anne Mainwaring, and James Bee
In April 2023, the European Commission (Commission) published a series of answers to questions that the European Supervisory Agencies (ESAs) had raised in September 2022 on the legal interpretation of certain aspects of the Sustainable Finance Disclosure Regulation (SFDR). The answers seek to clarify outstanding questions from stakeholders, including in relation to the definition of “sustainable investment” under the SFDR. Previous uncertainty with respect to this definition contributed to considerable market movement in the form of product re-classifications in the latter half of 2022.
The “AIFMD II” proposals continue their progress through the EU legislative process with more detail provided, but in many areas specific criteria will not be known until Level 2 measures are developed.
By Nicola Higgs, Jaime O’Connell, Denisa Odendaal, and Dianne Bell
On 9 February 2023, the European Parliament’s Economic and Monetary Affairs Committee (ECON) published a report on the amendments it has adopted to the European Commission’s legislative proposal for a directive (the Directive) amending the Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD) and Directive 2009/65/EC (UCITS Directive). The proposed new legislation arises out of the Commission’s AIFMD review and the identification of specific areas where the AIFMD framework could be improved, as well as the Commission’s view that a number of those issues were equally relevant for the activities of UCITS. As such, both directives will be amended to better align their requirements.
The European Securities and Markets Authority proposes to restrict ESG- and sustainability-related terms in the naming of funds, with an eye on the US and UK fund naming regimes.
By Paul Davies, Nicola Higgs, Anne Mainwaring, and Dianne Bell
On 18 November 2022, the European Securities and Markets Authority (ESMA) published its consultation paper on guidelines in relation to funds’ names, including quantitative thresholds that would need to be met before ESG- and sustainability-related terminology can be used in funds’ names. The proposed rules would set common standards for AIFMs[1] and UCITS[2] management companies when promoting AIFs and UCITS using an ESG- or sustainability-related name, including when these funds are set up as EuVECA, EuSEF, and ELTIFs[3] to facilitate marketing of funds throughout EU Member States.
The FCA hopes the proposals will protect consumer trust in ESG-related financial products and help consumers navigate the increasingly complex ESG-related financial market.
By Paul A. Davies, Nicola Higgs, Michael D. Green, James Bee, and Anne Mainwaring
On 25 October 2022, the UK’s Financial Conduct Authority (FCA) issued a consultation paper (the Consultation Paper) on Sustainability Disclosure Requirements (SDR) and investment labels.[1] According to the FCA, investment firms in the UK may intentionally or unintentionally be making exaggerated, misleading, or unsubstantiated sustainability-related claims about their products — also known as greenwashing — which has impacted consumer confidence in ESG-related or sustainable investment products in the UK. The proposals in the Consultation Paper seek to address this risk and restore consumer faith.
A snapshot of the global regulatory landscape in the context of ESG-related disclosures.
By Nick Benson, David Berman, Paul A. Davies, Laura N. Ferrell, Simon Hawkins, Nicola Higgs, Farhana Sharmeen, Anne Mainwaring, Dominik Schoeneberger, Shirley Wong, and Charlotte Collins
The global asset management community has long been among the leaders in recognising the investment and risk management benefits of tracking the environmental, social, and governance (ESG) performance of the assets
The FCA is proposing a disclosure regime for asset managers, life insurers, and pension providers.
By Paul Davies, Nicola Higgs, Victoria Sander, David Berman, Anne Mainwaring, and Charlotte Collins
On 22 June 2021, the FCA published a Consultation Paper (CP21/17) on introducing climate-related financial disclosure rules and guidance for asset managers, life insurers, and FCA-regulated pension providers. The disclosure requirements would be consistent with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
The FCA plans to introduce the disclosure requirements in a new ESG Sourcebook in the FCA Handbook. The regulator anticipates that this Sourcebook will expand over time to include new rules and guidance on other climate-related topics and wider ESG considerations.