We have expanded the list of climate policies we assess company engagement with to incorporate land-use related policy, referring to legislative or regulatory measures to enhance and protect ecosystems and land where carbon is being stored. Assessments under this category are currently underweighted in terms of their contribution to the overall company metrics. This weighting will be progressively increased over the next 6 months.
We adjusted the terminology used to describe the queries running down the left-hand side of our scoring matrix and added additional explanatory text to the info-boxes. This has no impact on the scores and methodology. It has been done following user feedback to improve clarity.
The Investment Association (IA) has communicated high-level support for sustainable finance policy in the EU and UK. The IA appears to have fairly high engagement on EU and UK sustainable finance policy, with mixed positions.
The IA has strongly supported the UK’s net-zero by 2050 goal and advocated for action through initiatives, including the UN-led Race to Zero and the Net Zero Asset Managers (NZAM) initiative. It has also advocated for investment strategies guided by the need to achieve zero-carbon economies by 2050.
In comments to the House of Commons and the European Commission during 2020, the IA stated support for sustainable finance regulations. However, in 2019 it did suggest that regulation should promote responsible investment without limiting investor choice, and that the regulatory environment should provide flexibility for multiple approaches and objectives.
On sustainability-related disclosures, the IA has advocated for Task Force on Climate-Related Financial Disclosures (TCFD) alignment globally, as well as supported disclosures by the corporate sector, however, it has been less supportive of disclosures by the financial sector. The IA has advocated for increased ambition on companies’ reporting on climate-related risks in a letter to the G7 leaders in 2021, and supported efforts by the IFRS Foundation consultation on sustainability reporting although it cautioned against implementing the double materiality approach used in the EU. In a climate change position paper in 2020, it advocated for mandatory implementation of the TCFD in the UK, restating this position in comments to two inquiries by the House of Commons Treasury Committee in 2020. It also supported the TCFD implementation for standard listed companies and listed issuers in response to the FCA in 2020-2021. However, it has been less supportive in the implementation of the TCFD for asset managers, life insurers and FCA-regulated pension providers, cautioning against the mismatch in disclosures obligations through the investment chain and suggesting an "as far as you are able" approach for certain metrics. It also suggested the same approach to DWP in 2021 on the disclosure by occupational pension schemes.
The IA has been cautious in its support for a taxonomy, both in the EU and UK. The IA opposed the expansion of the EU taxonomy to cover environmentally harmful activities in 2020. In comments to the UK House of Commons Treasury Committee in 2020, the IA stated concerns around the usability of a UK taxonomy, particularly around narrowing the sustainable investment definition.
In a 2019 press release, the IA supported a voluntary UK product label to identify funds with a sustainable approach. 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. The IA has also opposed the need for a UK green bond standard and asks the FCA to encourage alignment with existing standards instead. In response to the EU Commission’s Renewed Strategy consultation, the IA did not support proposed labels such as a label for investment funds.
The IA has generally supported integrating sustainability considerations into fiduciary duty, with some exceptions. In comments to the European Securities and Markets Authority in 2019, the IA supported the inclusion of ESG preferences in suitability preferences. In 2020, the IA advocated for a delay to implementation and suggested flexibility on principal adverse impacts disclosure in response to the European Supervisory Authorities on ESG disclosure. In response to the European Commission on its Renewed Sustainable Finance Strategy in 2020, the IA did not support the need to adapt rules on fiduciary duties or engage with pension fund members on ESG preferences, however, it did support the Commission’s proposal to explore ESG integration and reporting for pension providers. In the UK, the IA supported disclosures on the integration of ESG into investor duties as part of the FCA’s proposed Sustainability Disclosure Requirements (SDR), as well as stated support for policy to integrate ESG into investor duties regulation in comments to the House of Commons Treasury Committee in 2020. However, it did state concerns about portfolio alignment metrics for pension schemes in response to the UK’s DWP in 2022.
The IA has disclosed all its positions on sustainable finance policies and engagement activities undertaken to influence these policies. The IA is also fully transparent about its members, including companies and individuals holding key position in the executive and key committees.