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PIMFA WEEKLY NEWS BULLETIN | 8 November 2021 Dear Nigel,
Welcome to the PIMFA Bulletin; grab a coffee and take 10 minutes to read the latest news impacting you and your firm.
COP26 - Finance Ministers discuss mobilising funding for rapid, large-scale climate action
Finance Ministers, international finance institutions and the financial sector met at COP26 on 3 November to mobilise global finance for climate action. Mobilising finance is critical to deliver the urgent action needed to limit global temperature rises to 1.5C. Trillions of dollars of additional investment per year are needed to secure a low-carbon future and support countries already living with the devastating impacts of climate change.
Private financial institutions also took a major step to ensure that existing and future investments are aligned to the global goal of net zero. Over $130 trillion of private finance is now committed to science-based net zero targets and near-term milestones, through the Glasgow Financial Alliance for Net Zero (GFANZ), led by Mark Carney, who was a keynote speaker at PIMFA's inaugural Virtual Fest last year. GFANZ members are required to set robust, science-based near-term targets within 12-18 months of joining, and more than 90 of the founding institutions have already done so. A key focus of GFANZ is supporting developing countries and emerging markets.
Finance Ministers also discussed that the billions of dollars in public finance must be used to leverage the trillions of dollars in private finance needed for a climate resilient, net zero future, and how to support developing countries to access that finance. The US, the European Commission and the UK also committed to work in partnership with countries to support a green and resilient recovery from COVID-19 and boost investment for clean, green infrastructure in developing countries.
The UK also committed £576 million at COP for a package of initiatives to mobilise finance into emerging markets and developing economies, including £66 million to expand the UK’s MOBILIST programme, which helps to develop new investment products which can be listed on public markets and attract different types of investors.
PIMFA summary of latest FCA Investment Firms Prudential Regime Update
The FCA has published an Investment Firms Prudential Regime (IFPR) update and a PIMFA summary of this is available here.
For more information and to receive IFPR updates from the FCA, please visit their website here.
New: Cyber Emergency Button
PIMFA & Mitigo have launched the first Cyber Emergency Hotline, available at the click of a button on the PIMFA Homepage.
If you are experiencing a cyber issue, you can access this at any time and PIMFA PLUS Partner - Mitigo will provide a rapid response, containment and investigation service, and can assist you with reporting obligations to regulators and clients. As a PIMFA member, you are entitled to a discounted rate to use Mitigo's cyber services. To find out more about this service, please click here.
PIMFA MSCI Index Series – New asset allocations effective from 01.12.2021
The PIMFA Indices Committee have made changes to the portfolio weights of the MSCI PIMFA Index Series’. Changes below will be effective from Wednesday 1st December. MSCI PIMFA Private Investor Index Series
MSCI PIMFA Equity Risk Index Series
For further details please contact us at indices@pimfa.co.uk
Sign up your colleagues!
Did you know that your colleagues can also sign up to PIMFA on an individual level for free, and benefit from a host of great membership benefits?
Individuals from non-member firms can also sign up to receive Bulletin and updates on new events and learning that may be of interest. Register for a free account here.
FCA publishes Sustainability Disclosure Requirements and Investment Labels Discussion Paper
The FCA has published a Discussion Paper - 'Sustainability Disclosure Requirements and Investment Labels' (DP 21/4) - to coincide with COP26 Finance Day, inviting views on potential criteria to classify and label investment products. This will help consumers navigate their sustainability characteristics.
Financial services and markets have an important role in the transition to a more sustainable future. Financial services firms are increasingly incorporating consideration of environmental, social and governance (ESG) factors into their operations, products and services and, in response to growing consumer demand, firms are providing an increasingly diverse range of products that target various sustainability objectives, themes or characteristics. The FCA welcomes the growing market and innovation in these products but also warns there is a risk of harm if the market responds to rising demand without adequate regulatory checks and balances and delivers poor outcomes to consumers. Without common standards, clear terminology and accessible product classification and labelling, there is also a risk that consumers find it difficult to navigate the landscape of products and assess product suitability.
The FCA wants consumers to have enough information to assess which products meet their needs and hold firms to account for their sustainability claims. To help inform the FCA work, this DP seeks feedback on potential approaches to the design of sustainable investment labels, consumer-facing disclosures for investment products and client and consumer-facing entity and product-level disclosures by asset managers and FCA-
regulated asset owners. The FCA is asking for comments on the DP by Friday 7 January 2022 and PIMFA will provide a response.
If you have not attended previous meetings of the PIMFA Sustainable Finance Working Group and would like to attend the next meeting which will discuss the DP Sustainability Disclosure Requirements and investment labels, please contact Maja Erceg.
Latest PIMFA Press Releases
PIMFA delighted to announce winners in first Diversity & Inclusion Awards
Latest PIMFA Press Coverage
Investors Chronicle: Wanted: portfolio for inflation, stagflation and contagion
FCA must focus attention on transformation programme following departure of Chair Charles Randell
Raconteur: How to tackle your team’s fears
PIMFA welcomes industry guide helping advice firms to structure their relationships with Discretionary Investment Managers
Money Marketing: Pension sector reacts to
GoSimpleTax becomes latest PIMFA Plus Partner – offering firms a tailored tax solution for clients
International Adviser: How are ESG,
over AI
govt defeat in Lords over triple lock
sustainability and impact investing different?
FT Adviser: Regulator should overhaul entire Priips regime
PIMFA's Latest Consultation Responses
PIMFA’s latest Consultation Response is to the FCA CP 21/28 on the New Cancellation and Variation Power; Changes to the Handbook and Enforcement Guide Read this and all other PIMFA consultation papers here.
UK to become the first Net Zero-aligned Financial Centre
The UK will be the world’s first Net Zero-aligned Financial Centre. This means that UK financial institutions must have a robust, firm-level transition plan setting out how they will decarbonise as the UK meets its ambitious and legally binding net zero targets, and strong Government oversight of the financial sector as a whole to ensure financial flows actually shift towards supporting net zero.
The UK will move towards making publication of transition plans mandatory. This will require asset managers, regulated asset owners and listed companies to publish transition plans that consider the government’s net zero commitment or provide an explanation if they have not done so. As standards for transition plans emerge, the Government and regulators will take steps to incorporate these into the UK’s Sustainability Disclosure Requirements and strengthen requirements to encourage consistency in published plans and increased adoption by 2023. The Government intends to legislate to deliver this.
The Government will set up a high-level Transition Plan Taskforce, bringing together British industry, academia, regulators and the third sector to develop a ‘gold standard’ for transition plans and associated cutting edge metrics, coordinating with international efforts under the Glasgow Financial Alliance for Net Zero (GFANZ) and others, and reporting by the end of 2022. This will set a robust standard and help to tackle greenwashing. E3G and the Centre for Greening Finance and Investment (CGFI) will act as the secretariat, with funding provided by philanthropy. The FCA will be formally involved and will have regard to its findings.
London Overtakes Amsterdam to take first place in GGFI 8
The eighth edition of the Global Green Finance Index (GGFI 8) has been published, providing evaluations of the green finance offerings of 80 major financial centres around the world. The GGFI serves as a valuable reference into the development of green finance for policy and investment decision-makers. The GGFI is compiled using 143 instrumental factors. These quantitative measures are provided by third parties including the World Bank, the Economist Intelligence Unit, the OECD and the United Nations.
London has overtaken Amsterdam to take first place in GGFI 8. Amsterdam is second, with San Francisco overtaking Zurich to take third place. London may have benefitted from both recent UK government action on green finance, including the issue of the first UK sovereign green bond, and from its position as host of COP 26. Asia/Pacific centres again performed strongly, with Beijing, Shanghai, Seoul, and Singapore all consolidating gains.
EVENTS & LEARNING
Operational Resilience for Firms
25 November | Click here to register
This half-day PIMFA Virtual event with PwC on Operational Resilience will offer attendees great insights on topics including: •
Executive and Board engagement on operational resilience (and the self-assessment)
•
Operational resilience meets financial resilience: how ICARA fits with the operational resilience
•
Managing your third parties
•
Testing your resilience: the importance of robust scenario testing
•
Level of sophistication” how much is enough? Click here to register
View other upcoming PIMFA Events and Learning here.
INDUSTRY EVENTS
PIMFA & LEXIS NEXIS WEBINAR | How is technology and social change driving transformation in wealth management?
17 November | 11am - Midday PIMFA Director of Government Relations and Policy, Tim Fassam will be moderating the webinar with the speakers including: • Tamsin Baumann, Partner, Deloitte • Gerard Green , Head of AML EMEA, Invesco • Nina Kerkez , Director of Consulting, LexisNexis Risk Solutions • James Galea, Financial Crime Compliance – UK MLRO, M&G To find out more and register, for this FREE webinar, please click here.
THREESIXTY WEBINAR | Structuring relationships between financial advisers and discretionary investment managers
17 November | 11am - Midday
threeisxty recently collaborated with PIMFA and DFM Connect to publish a guide to help financial advisers and discretionary investment management firms understand the different ways that relationships between their firms can be structured. The guide is informed by, and builds on, previous work carried out by the Personal Finance Society and also picks up on a wide range of queries and concerns raised by adviser firms. To find out more and register your FREE place, please click here.
CITY & FINANCIAL EVENT | The FCA Consumer Duty Virtual Summit
PIMFA are proud to be partnering with City & Financial on the FCA Consumer Duty Summit.
Tim Fassam, Director of Government Relations and Policy, PIMFA, will be taking part in a panel discussion. You can join him and listen to the discussion pertaining to 'The impact for financial institutions of the new consumer duty proposals'. PIMFA members will receive 20% discounted rates with the code “CD20PIMFA”, find out more and register your place here. PROTECTION REVIEW | CONFERENCE, DINNER & AWARDS
8 December 2021 PIMFA are proud to be partnering with Protection Review Conference, Dinner and Awards for 2021. Speakers on the day include: FT Adviser, AIG, Sesame Bankhall Group, LifeSearch, Cicero and more. To find out more about the event, please click here.
PIMFA members can register for their FREE place here.
HMT Advisory Notice on money laundering and terrorist financing controls in high risk jurisdictions
HM Treasury has published an advisory notice in relation to money laundering and terrorist financing controls in higher risk jurisdictions. FATF has recently published two statements identifying jurisdictions with strategic deficiencies in their anti-money laundering / counter terrorist financing regimes. HMT has therefore set out a list of jurisdictions that it considers as high risk where firms should apply counter measures and enhanced due diligence
measures: DPRK and Iran.
HMT has also set out a list of jurisdictions where firms should take appropriate action to minimise the associated risks, which may include enhanced due diligence measures in high risk situations. You can read the Advisory Notice, with the full list of countries, here.
The Money Laundering and Terrorist Financing (Amendment) (N.3)(High Risk Countries) Regulations 2021
On the 1st November the government published The Money Laundering and Terrorist Financing (Amendment) (N.3)(High Risk Countries) Regulations 2021, substituting the list of high risk third countries in Schedule 3ZA for a new list. The new list mirrors the updates made by the Financial Action Task Force to its own list of high risk countries in October. You can read the new Schedule 3ZA list here.
Reporting on TCFD will become law in the UK from April 2022
The UK will become the first G20 country to enshrine in law mandatory TCFD-aligned requirements for the largest companies and financial institutions to report on climaterelated risks and opportunities. On 28 October the Department for Business, Energy & Industrial Strategy (BEIS) published the results of a consultation into climate related financial disclosure for listed companies. It confirmed that from 6 April 2022, TCFD reporting will be mandated for more than 1,300 of the largest UK-registered companies and financial institutions pending parliamentary approval. These include many of the UK’s largest traded companies, banks and insurers, as well as private companies with more than 500 employees and £500m in turnover.
The announcement also included the introduction of a qualitative scenario analysis requirement and closer alignment of the regulations to language used in the TCFD recommendations themselves. Economic secretary to the Treasury John Glen said: “These
TCFD requirements will not only help tackle greenwashing but also enable investors and businesses to align their long-term strategies with the UK’s net-zero commitments.”
FCA: Strategy for positive change - our ESG priorities
The FCA has published a Strategy for positive change: our ESG priorities document, which sets out the regulator’s target outcomes and the actions it expects to take to deliver these. The aim is to support the financial sector in driving positive change, including the transition to net zero. The strategy sets out how the FCA plans to deliver on the target ESG-related outcomes included in its Business Plan 2021/22, along with some core principles that it has applied to identify the key themes of its work programme and its near-term priorities. The FCA’s work is based on 5 core themes: Transparency – promoting transparency on climate change and wider sustainability along the value chain; Trust – building trust and integrity in ESG-labelled instruments, products and the supporting ecosystem; Tools – working with others to enhance industry capabilities and support firms’ management of climate-related and wider sustainability risks, opportunities and impacts; Transition – supporting the role of finance in delivering a market-led transition to a more sustainable economy and Team – developing strategies, organisational structures, resources and tools to support the integration of ESG into FCA activities.
The regulator is working with the Government, other UK regulators, industry and other stakeholders to ensure UK financial services and the UK regulatory regime are at the forefront of ESG internationally. The FCA is working actively with international partners to develop robust and commonly agreed international standards on ESG that can serve global markets effectively and it wants UK consumers, financial services firms and securities issuers to interact and operate within a world-leading system. They are also looking closely at how technology, innovation and a data-led approach can be harnessed to support the integration of ESG both across markets, and in our regulation.
The strategy will continue to develop as the FCA deepens its knowledge, resources and understanding of the changing landscape. Further detail and granularity in certain areas will be provided as the regulator’s thinking evolves – most notably, the long-term objectives and priorities under each of the E, S and G dimensions, as well as the success measures and performance indicators.
HM Treasury: UK welcomes work to develop global sustainability reporting standards alongside 36 international partners
The UK government joins 36 international partners from 6 continents to welcome the establishment of the IFRS Foundation’s new International Sustainability Standards Board (ISSB) at COP26 to develop comprehensive global baseline sustainability reporting standards under robust governance and public oversight.
The IFRS Foundation confirmed consolidation of two sustainability reporting organisations, the Value Reporting Foundation and the Climate Disclosure Standards Board, to create a global standard-setter for sustainability disclosures for the capital markets. The Foundation also published two prototype standards to enable the ISSB to rapidly build on existing frameworks, including the TCFD, when developing its standards. Standards will be subject to full public consultation and can be considered for adoption by jurisdictions on a voluntary basis.
Jurisdictions will have their own legal frameworks for adopting, applying or otherwise making use of international standards. List of jurisdictions: Australia, Brazil, Canada, Chile, China, Egypt, Ethiopia, European Commission, Fiji, France, Germany, Greece, Guatemala, India, Indonesia, Italy, Jamaica, Japan, Kenya, Korea, Luxembourg, Mexico, Morocco, Netherlands, New Zealand, Nigeria, Philippines, Saudi Arabia, Seychelles, Singapore, Spain, Switzerland, Tonga, Turkey, UK, Uruguay, USA.
EY Global Institutional Investor Survey
According to the 2021 EY Global Institutional Investor Survey, 74% of institutional investors are more likely to “divest” based on poor ESG performance, than before the COVID-19 pandemic. The vast majority, 90%, say they now pay more attention to companies’ ESG performance when making investment decisions, but admit they have been slow to take concrete action. Rising numbers of investors worry about the quality and clarity of information from companies. The majority of investors intend to look more closely at ESG risks across their portfolios
and investment targets in the future. 77% of those surveyed say that, over the next two years, they plan to step up their analysis of “physical” risks – the impact of climate change on a business’ ability to provide its products and services. This is an increase from 73% in 2020. Similarly, 80% will be doing more to evaluate “transition” risks – which are the market impacts that might result from the move to a low carbon economy – up from 71% in 2020. The report, now in its sixth year, canvasses the views of 320 institutional investors across 19 countries.
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