The Investment Association, the UK’s trade body for the asset management industry, has launched the first industry-wide consultation on sustainable and responsible investment (SRI).
The consultation, which will close on March 1, seeks the views of asset managers on agreeing standard definitions on commonly-used terms such as environmental, social and governance (ESG) integration, impact investing and negative-screening. The aim is to agree an industry-endorsed set of standard definitions.
The consultation also solicits industry views on the development of a proposed voluntary UK product label designed to help retail investors easily identify funds which have adopted a sustainable investment approach. The label would also draw attention to SRI expertise within the UK.
Industry views on reporting frameworks used by asset managers to show how they embed ESG factors into their investment processes will also form part of the consultation.
Chris Cummings, chief executive of the Investment Association, said: “With SRI becoming an increasing priority for today’s investors, this consultation is an important step forward in gathering the views of the industry with the ultimate aim of bringing greater clarity to savers.
“As significant investors, it is our role to help today’s investors achieve both their financial as well as their environmental and social goals.”
Hortense Bioy, director of passive strategies and sustainability research at Morningstar Europe, said that product development in the sustainability investment space has accelerated over the past two years.
She points to the fact that in Europe, a record total of 296 new open-end funds and exchange-traded funds (ETFs) were launched in 2018, compared with 260 in 2017 and 166 in 2016. Equally, the number of passive sustainable fund launches in 2018 reached a record high at 48, including 36 ETFs.
She said: “One of the key reasons for a taxonomy is to give investors added confidence that an investment is indeed “green” and to avoid "green washing".
“The new language will force asset managers to more clearly define their investment strategies and processes. Increasing the clarity of what defines sustainable investments is vital as the importance and awareness of ESG principles continues to escalate.”
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