Will Martindale, Group Head of Sustainability, Cardano, comments: “We welcome the FCA’s proposed climate-related disclosure rules as these will improve efficiency in metrics across the intermediation chain, reward first movers, and most importantly raise minimum standards. The climate crisis is a collective action problem. Ultimately, we need to move the market as-a-whole to protect savers from the environmental and financial consequences of climate change. TCFD is the right starting point. Introducing these regulations will help expedite methodology development, particularly around hard-to-reach asset classes, such as private equity, infrastructure, and derivatives. From October 2021, the UK’s largest pension funds will be required to prepare TCFD reports. It’s right that the companies in which they invest – and the asset managers through which they invest – are also required to do so.
“However, we also see benefits in introducing mandatory, but non-binding, target setting, rather than the comply-or-explain approach introduced by the consultation. While we understand the complexities of target setting, it shouldn’t stop the industry from trying. We need to see the whole industry adopt target setting on decarbonisation, not just pension funds. We believe the FCA should also require disclosure on climate-related stewardship as a core part of TCFD. There have been some successes here such as Climate Action 100+, but we need to see more industry collaboration on stewardship goals to send clear messages to the companies in which we invest.
“At Cardano, we’re committed to reducing our investment portfolios to net-zero carbon emissions by 2050. To achieve this, we will continue to collaborate with the industry to contribute to a more sustainable financial system. By coalescing around common themes and methodologies, collaboration allows for a faster, smoother transition. Cardano is a member and supporter of several sustainability-focused organisations, including the PRI, IIGCC, PCAF and the Net Zero Asset Managers Initiative and Climate Action 100+.”
Rosanna Bryant, co-head of financial services, Addleshaw Goddard, commented: "Going green is fast becoming business critical, and when it comes to tackling climate change the whole is most certainly greater than the sum of its parts.
"Our latest research shows that the majority of asset managers are already prioritising green investments. But this announcement from the FCA makes clear that firms will be held to account on how the investments they make today will impact all of our tomorrow.
"While this proposal by the FCA is an vital step forward, it's important that the regulator makes clear how this will interact or align with existing EU regulation for asset managers, such as the EU Sustainable Finance Disclosure Regulation."
*Research conducted by Addleshaw Goddard of 500 business leaders and 500 financial services leaders (asset managers, banks, insurers) across the UK and Europe.
Key findings include:
? 92% of business leaders saying that banks have been significant in influencing their business to act more sustainably. This was followed by governments (87%), and other financial sector groups including investors and insurers (both 86%);
? 84% of finance providers say they won’t offer services to companies that lack a clear net-zero strategy;
? 100% of the finance community plan to turn off the funding tap in at least two sectors within the next four years to businesses that lack a transition strategy;
? 65% of the finance community say they already always formally assess organisations on ESG or sustainability criteria;
? Almost all businesses (99%) have been asked by investors to provide evidence of their sustainability performance over the last 12 months, while almost half (47%) have been asked for evidence by banks, and a fifth (19%) have been asked by insurers;
? More traditional aggravators for sustainable change, such as NGOs, the media and even their own employees were lower down the list.
? Both mid-size (81%) and very large businesses (75%) cite pressure to keep costs low as the biggest barriers preventing them from becoming more sustainable.
? Only 2 out of 10 medium-sized businesses say sustainability is currently a boardroom priority.
? 72% of medium-sized businesses expect that sustainability will become a top-two boardroom priority by 2025, compared to 82% of very large businesses.
? Medium-sized businesses are falling behind on sustainability for several reasons, including:
a lack of a joined-up response among industry (a barrier for 76% of mid-size businesses vs 50% of very large businesses);
difficulty in raising new equity finance (75% vs 56%);
government regulation (73% vs 52%); and
a lack of access to good quality sustainability data (75% vs 60%).
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