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Guiding principles on design, delivery & disclosure of ESG & sustainable investment funds

July 23, 2021

What has happened?

In July 2021, the FCA issued a letter to the chairs of authorised fund managers (AFMs), setting out its expectations on the design, delivery and disclosure of environmental, social and governance (ESG) and sustainable investment funds. This letter is available here.

What do you need to do?

ESG and sustainable investment funds are currently the fastest-growing segment of the European funds market The FCA has pointed out that it receives a high volume of fund authorisation applications with a sustainable focus and that many of these applications are of poor quality and fall below the FCA’s expectations.

The FCA also expects clear and accurate ongoing disclosures to consumers where funds make ESG-related claims.

It has therefore developed a set of four guiding principles, contained and commented on in the letter with examples provided, in order to help firms apply the existing rules so as to ensure that any ESG-related claims are clear and not misleading, both at the time of application (in the fund prospectus, for example) and on an ongoing basis (in financial promotions, for example), so that consumers can make informed choices. The three detailed principles flow from an overarching principle of consistency.

The FCA has undertaken to continue to scrutinise and challenge firms on their fund strategies and disclosures and to ensure that documentation submitted for authorisation meets regulatory requirements.

The guiding principles are relevant where an FCA authorised fund pursues a responsible or sustainable investment strategy and claims to pursue sustainability characteristics, themes or outcomes. They are targeted at funds that make specific ESG-related claims, but not at those that integrate ESG considerations into their mainstream investment processes.

How can we help you?

If you’d like to know more about how we can help you with your ESG finance arrangements, or with any other related regulatory compliance issues such as the Taskforce on Climate-related Financial Disclosure rules or the Sustainable Finance Disclosure Regulation, our expert team is here to help.

Contact us today on 0207 436 0630 – or email