Mobilising Green Investment – 2023 Green Finance Strategy

from PIMFA Weekly News Bulletin - 3 April 2023

HM Treasury has published ‘Mobilising green investment: 2023 green finance strategy’, an update to the earlier 2019 strategy. The 2023 Strategy aims to reinforce and expand the UK’s position as a world leader on green finance and investment, delivering five key objectives:

• UK financial services growth and competitiveness

• Investment in the green economy

• Financial stability

• Incorporation of nature and adaptation

• Alignment of global financial flows with climate and nature objectives

This sets out the framework for the UK to become the world’s first Net Zero Aligned Financial Centre, outlining how the government will ensure market participants have the information and tools they need to align to the climate and nature goals and for supporting technologies as they grow to commercialisation, including through the work of the public finance institutions.

It also sets the next steps to grow high-integrity voluntary markets, including a framework for developing nature markets in the UK. Finally, the strategy shows how the UK is building on the legacy of COP26 by accelerating global growth in green finance, including to emerging markets and developing economies.

UK Green Taxonomy

In the updated Green Finance Strategy, the Government confirmed it will deliver a UK Green Taxonomy – a tool to provide investors with definitions of which economic activities should be labelled as green. This will support the quality of standards, labels and disclosures used in the industry for green finance activity.

The Government proposes that nuclear will be included within the UK’s Green Taxonomy, subject to consultation. After the Taxonomy has been finalised, companies will be initially expected to report voluntarily against it for a period of at least two reporting years after which the Government will explore mandating disclosures.

Government does not wish to place undue burdens on companies whose size or scale makes the disclosure of taxonomy related information unreasonable. Therefore, the Government will develop proposals with proportionality in mind and expects to consult on the Taxonomy in Autumn 2023.

Inside FCA Podcast: Consumer Duty information sharing and the April milestone

In the latest episode in a series of podcast interviews dedicated to the Consumer Duty, FCA Head of Competition Policy Ed Smith talks to Ozge Ibrahim about the FCA's expectations for manufacturers to complete and share their products and services reviews by 30 April 2023, and the reasons behind this milestone.

The podcast is available here

Economic Crime Plan 2

On the 30th March, the Government published The Economic Crime Plan 2 setting out an ambitious strategy which builds on the first plan of 2019 and takes forward the public-private partnership with a multi-stakeholder approach. We are pleased that the ECP2 has an increased focus on reducing fraud and will run alongside a National Fraud Strategy, and aims to create an effective ecosystem within the UK to prevent economic crime.

The ECP2 sets out 43 actions aimed, amongst other things, at limiting the abuse of corporate structures, increasing the effectiveness of the supervisory regime through MLR review, disrupting money laundering by improving intelligence gathering, SARs reform, combating kleptocracy, and driving down sanctions evasion.

We particularly welcome the fact that the 43 actions will be closely monitored through performance dashboards so that the impact on outcomes can be assessed. We see this as a genuine step forward and we will be actively engaging with the government in the various workstreams going forward.

Future regulatory regime for Environmental, Social, and Governance (ESG) ratings providers

– PIMFA’s Sustainable Finance Working Group

On 30 March, HM Treasury published the consultation on regulating environmental, social and governance (ESG) ratings. Recognising that growing reliance on unregulated ESG ratings risks impacting the performance of investments and the credibility of the sustainable investment market, HMT considers there is clear benefit to be gained from improving the transparency of methodologies, governance, and processes of ESG ratings providers.

HMT proposes that the direct provision of an assessment of ESG factors to a user in the UK, where the assessment is used in relation to a specified investment in the RAO, unless an exclusion applies, be brought into regulation. The consultation seeks views on initial policy proposals and does not include settled positions or proposed legal drafting, which will be worked up using input from this consultation if HM Treasury decides to pursue regulation for ESG ratings providers.

The consultation is open until 30 June. PIMFA’s Sustainable Finance Working Group will meet to discuss the proposals and provide a response. If you wish to get involved and join the Working Group, please contact MajaE@pimfa.co.uk

FCA updates on SDR and investment labels consultation

On 29 March, the FCA published updates on its Sustainability Disclosure Requirements (SDR) and investment labels consultation, setting out some of the feedback on the proposals and next steps.

They intend to publish the Policy Statement in Q3 this year, and the proposed effective dates will be adjusted accordingly. The regulator is considering the feedback, including the approach to the marketing restrictions, refining some of the specific criteria for the labels and clarifying how different products, asset classes and strategies can qualify for a label, including multi-asset and blended strategies.

The FCA agrees it is important that consumers can navigate to those products that meet their needs and preferences, including products that may not qualify for a label, but nevertheless have some sustainability-related characteristics. The FCA says it has sought international coherence with other regimes and will continue to consider how to further support compatibility.

Discussion Paper (DP1-23) –Review of the Senior Managers and Certification Regime (SM&CR)

View the paper

The FCA and PRA are reviewing the effectiveness, scope, and proportionality of the regulatory regime. The aim of the DP is:

• To understand stakeholders’ views on the functioning of the SM&CR

• Identify areas where improvements could be made to help it work better for firms and regulators.

HMT Senior Managers & Certification Regime: a Call for Evidence

View the consultation

HMT’s Call for Evidence has been launched alongside the FCA and PRA’s joint Discussion Paper (DP1/23) to review the legislative framework of the SM&CR regime.

Stakeholders are invited to provide views on:

• How the SM&CR is currently operating in the financial services sector

• The key features of the regime

• The nature of any potential reforms required to improve its functioning

The regulators seek feedback on the general effectiveness, scope, and proportionality of the current regime, as well as specific aspects such as the authorisation process.

The deadline for responses is Thursday 1 June 2023.

Financial Ombudsman Service (FOS) publishes 2023/24 plans and budget

The consultation closes on Monday 29 May 2023.

PIMFA will be responding to these consultations and we will be convening a working group – any members who are interested in joining - please contact yasmina@pimfa.co.uk

On 31 March the FOS published their strategic plans and budget for 23/24

These include complaint trends, what they expect to see in the year ahead, and their aims for developing and resourcing their service.

The 2023 Q2 PIMFA Asset Allocation SURVEY IS NOW OPEN

Complete this quarter's survey, and you can:

• Receive a complimentary, 40 page report, showing you how the strategic asset allocations of your firms model portfolios compare to others

• Enable the index weight methodology for the MSCI PIMFA Private Investor and Equity Risk Index Series’ to ensure they remain relevant benchmarks for the UK wealth management sector

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EVENTS & LEARNING

TRAINING: CONSUMER DUTY SERIES –SESSION 1: PRACTICAL STRATEGIES & APPROACHES FOR TESTING CONSUMER OUTCOMES

19 April | 09:30 - 11:30

PIMFA FINANCIAL CRIME CONFERENCE

LONDON

18 May | 10:00 - 18:00

The Consumer Duty series tackles the implementation of Consumer Duty head-on to provide PIMFA member firms with a wellstructured approach for Project Leads, Compliance & Risk Heads alongside Senior Managers to confidently meet the July deadline.

For more information and to register, please click here

The PIMFA Financial Crime 2023 gives attendees access to industry leading debates from professionals across the regulatory, law enforcement, innovators and providers in the Financial Crime space.