IA Launches Product Definitions For Responsible Investment

Shanny Basar
  • First industry-wide framework to categorise most common approaches to responsible investment
  • New data collection on responsible investment
  • 85% of investment managers responding to the IA’s consultation support a fund-level label

The investment management industry has come together to agree a common language and clear product categorisation for responsible investment approaches to help savers better access and compare funds with a focus on environmental or social outcomes. Currently a variety of terms and phrases are used in different ways, which could leave customers confused or unable to find the investment opportunities to match their diverse responsible investment goals.

The industry-wide definitions, published today by the Investment Association (IA), aim to provide clarity and consistency for savers, and are based on consultation with over 40 investment management firms, representing £5 trillion of assets. Investment managers are encouraged to adopt the framework and definitions, which reflect the wide range of responsible investment approaches, including commonly-used terms such as: ESG integration, stewardship, impact investing, exclusions and sustainability focus.

As part of the IA’s aim to help savers navigate the sustainable and responsible investment fund market, the trade body is continuing to explore the creation of a UK retail product label. More than 8 out 10 firms (85%) which responded to the industry consultation support a fund-level label. Providing clarity to investors was the single most cited reason for establishing a label, with firms also keen to highlight the UK’s role as a global leader within sustainability and responsible investment.

Chris Cummings, Chief Executive of the IA, said:

“Today’s savers want to understand the impact of their investments on the world around them. One significant barrier to the growth of responsible investment has been the lack of a common language and framework that describes and categorises these approaches and products. The agreement of industry-wide definitions provides consumers with that much-needed clarity and choice. The investment management industry can now give its customers a clear picture of the opportunities available to them and the confidence that their chosen product matches their expectations. This is a new milestone in making it easy for people to choose a responsible investment.”

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:

“We welcome this industry-wide initiative to bring consistency and clarity to the responsible investment market. The FCA is working to enable firms to manage the risks and opportunities from moving to a low carbon economy as well as setting expectations around the creation of green financial products for consumers and we look forward to working with the investment management industry to achieve these aims.”

From the start of next year IA members will also be asked to identify which funds should be classified as having responsible investment characteristics to help bring further clarity to this market. The IA will publish statistics on funds with responsible investment characteristics later in 2020.

Source: IA

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