Climate Finance Policy Engagement Analysis
Climate Lobbying Overview: The Investment Association (IA) has communicated high-level support for sustainable finance policy in the EU and UK. The IA appears to be somewhat actively engaged on EU and UK sustainable finance policy, with mixed positions.
Top-line Messaging on Climate-Related Financial Policy: The IA has strongly supported the UK’s net-zero by 2050 goal in its 2022 Climate Change Position, and advocated for investment strategies guided by the need to achieve zero-carbon economies by 2050 in written evidence to UK Parliament in 2022. It advocated for the Financial Conduct Authority (FCA) to align its regulatory principles to the Climate Change Act 2008 in written evidence to Parliament in October 2022, and stated support for sustainable finance regulation in response to the UK Green Finance Strategy in June of the same year as well as in evidence to the UK Parliament’s Environmental Audit Committee. However, in 2022 feedback to the UK Government, it did caution against incentives to only invest in low carbon sectors or regions, and in 2022 comments to the HM Treasury, it questioned whether financial services regulation is the best "mechanism in which to include such wider economic and industrial policies" and highlighted that it is "important to preserve the principles of investor choice and the ability of fiduciaries to act in their clients’ best interests in accordance with their investment objectives".
Position on Regulated Corporate Climate Disclosure: The IA advocated for increased ambition on companies’ reporting on climate-related risks in a letter to the G7 leaders in 2021, and supported the International Sustainability Standards Board (ISSB) standards in a 2022 consultation response, however cautioned against implementing a double materiality approach. During 2022, it offered broad support for regulated corporate climate disclosure, including data and methodologies of scope 3 emissions in response to the Update to the Green Finance Strategy in the UK.
Position on Climate Standards and Labels: In its 2023-2024 Climate Change Action Plan, The IA appeared to support the development of sustainable investment labels by the UK Financial Conduct Authority. However, in response to the FCA in 2022 on the Sustainability Disclosure Requirements (SDR), it highlighted that the labelling regime proposed should be more flexible and have less rigid categories, and in comments to the EU Commission’s Renewed Strategy consultation, the IA did not support proposed labels such as a label for investment funds. The IA also did not support ESMA’s proposed quantitative thresholds for funds using sustainability-related terms in a 2022 consultation response. In comments to the FCA on climate topics in capital markets in 2021, the IA opposed the need for a UK Green Bond Standard and urged the FCA to encourage alignment with existing standards instead.
Position on Integrating Climate into Investor Duties and Risk Management: In the UK, the IA has supported disclosures on the integration of climate into investor duties as part of the FCA’s proposed Sustainability Disclosure Requirements (SDR) in a 2022 consultation response, however pressed for ‘greater flexibility’ over marketing rules under UK SDR in a 2023 press release. Also in 2022, it stated concerns about portfolio alignment metrics for pension schemes in its response to a UK Department of Work and Pensions consultation. In its 2023-2024 Climate Change Action Plan, The IA appeared to support the work of the FCA-PRA convened Climate Financial Risk Forum (CFRF) in developing industry best practice to measure and manage climate-related risks.