FCA praises UK's green pandemic recovery

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FCA praises UK's green pandemic recovery

The Financial Conduct Authority has championed the UK’s green approach to rebuilding the economy after the pandemic.

Alexander Smith, head of department for strategic and cross-cutting policy at the FCA, said adopting a green approach is especially important in 2021 when the UK will host the G7 summit this summer and Cop26 in November.  

Speaking at the Pimfa Virtual Fest V2 yesterday (March 10) he said: “2021 is going to be a significant milestone for global focus on climate change. There are both challenges and opportunities ahead. 

“We are starting to hear from right across business, government and wider society that more responsible business and a greener recovery from the pandemic is really important. 

“This combined with changing consumer demands is having a real and genuine impact. Money is starting to move. Its flow into UK responsible investment funds has been three times higher in 2020 than in 2019. And these changes impact the work we do at the FCA.” 

ESG investing has boomed in popularity in recent years as fears over climate change have led investors to consider the impact of their money and as a growing number of millennials have begun investing.

But it has brought with it a potential maze for advisers, who are tasked with navigating a world of greenwashing, confusing terminology and conflicting client preferences.

In his speech Smith set out the FCA’s key work streams on sustainable finance, which include transparency, trust and tools. 

Commenting on the importance of transparency for advisers, he said: “High quality information is crucial to firms, consumers and their advisers. For firms this is about price formation and decision making. 

“Market participants need the right information to determine the true value of assets and price them accordingly. These prices feed through into decision making. 

“By contrast low quality information can lead to mispricing and undermine market integrity – this ultimately impacts both firms and consumers. Consumers and their advisers also need clear and consistent information. 

“High quality and accessible information helps consumers and advisers find, understand and compare products. The importance of high-quality information is why we are focused on disclosure transparency.” 

Smith also used his speech at the online session entitled ‘The FCA Approach to Sustainable Finance’, to set out the FCA’s role in helping promote harmonisation in sustainability standards and argued for the case of a global standard. 

He also championed the UK's green taxonomy to create consistency for advisers and their clients. 

Smith said: “We welcomed the chancellor's speech last year on plans for the UK's green taxonomy and we also welcome the decision to take the EU’s taxonomy as a starting point for the UK version. 

“For consumers and advisers that would mean more consistent useful information to compare products and less unnecessary disruption. 

“Taxonomy is a real opportunity for the UK to demonstrate that we are taking sustainable finance seriously, that we are ambitious and that we want to work with others to drive this agenda.” 

Aamina Zafar is a freelance reporter for FTAdviser