DP21/4: Sustainability Disclosure Requirements and investment labels

Read DP21/4[1]

The input we receive to this Discussion Paper (DP) will inform the development of policy proposals for consultation in Q2 2022. This forms part of the Sustainability Disclosure Requirements (SDR) set out in the Government’s Greening Finance: A Roadmap to Sustainable Investing[2], published in October 2021. 

Financial services and markets have an important role in the transition to a more sustainable future. Financial services firms are increasingly incorporating consideration of environmental, social and governance (ESG) factors into their operations, products and services. And, in response to growing consumer demand, firms are providing an increasingly diverse range of products that target various sustainability objectives, themes or characteristics.

We welcome the growing market and innovation in these products. However, there is also a risk of harm if the market responds to rising demand without adequate regulatory checks and balances and delivers poor outcomes to consumers. Without common standards, clear terminology and accessible product classification and labelling, there is also a risk that consumers find it difficult to navigate the landscape of products and assess product suitability. We want consumers to have enough information to assess which products meet their needs and hold firms to account for their sustainability claims.

We aim to build trust in the market, improve transparency for consumers and better meet the information needs of institutional investors and other stakeholders. To help inform our work, this DP seeks feedback on potential approaches to the design of:

• sustainable investment labels 
• consumer-facing disclosures for investment products 
• client- and consumer-facing entity- and product-level disclosures by asset managers and FCA-regulated asset owners

Who this applies to 

The SDR disclosures and sustainable investment labels that we are introducing would apply to certain asset managers and FCA-regulated asset owners, and their investment products. But we welcome responses to this DP from all parts of the financial sector, and other interested parties. This includes:

• regulated firms
• industry groups and trade bodies
• consumer groups and individual consumers
• policymakers and other regulatory bodies
• industry experts and commentators
• academics and think tanks
• stakeholder advocacy groups

Next steps 

This discussion paper has now closed for comments.

Feedback from this will help us develop our proposed rules.

4 July update

We had aimed to consult in Q2 of 2022. We are now planning on consulting in the autumn, to allow us to take account of other international policy initiatives and ensure stakeholders have time to consider these issues.