InvestmentsJan 5 2022

ESG standards are key for UK's competitiveness, says IA

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ESG standards are key for UK's competitiveness, says IA
Jason Alden/Bloomberg

The chief executive of the Investment Association has said the development of consistent standards on environmental, social and governance investing will be key in helping the UK investment industry maintain its global pre-eminence.

Chris Cummings told FTAdviser 2021 been a year of monumental change for the investment industry.

He said the investment industry had faced "widespread challenges" such as Brexit which included navigating a wave of initiatives and regulatory reform to help the UK retain and develop its reputation as a leading financial centre.

“Especially within the context of our desire to ensure the UK remains the pre-eminent place for investment management – and that means driving our international competitiveness. 

“Our industry is the second largest investment centre in the world, but true competitiveness must now go beyond the natural advantages the UK has, which has helped build its position over time.”

He said one theme that would prove significant for this would be the growth in responsible investment, which will shape “not only the range of products available to investors”, but also the way they disclose and communicate information to clients.

“This is an evolving area in which the industry is working closely with policymakers and stakeholders to try to ensure both that the right information is available from the companies we invest in, and that fund-level disclosure is then clear for advisers and retail customers.

“Greater clarity and consistency is a crucial part of ensuring a well-functioning fund market with the consumer at the core.”

"[Diversity and inclusion has] moved on from being a matter of social-conscience to one about a better business case."Chris Cummings, chief executive, Investment Association

Cyber security remains an important subject and will be in 2022, Cummings said, as firms consider how to better utilise technology to deliver for customers.

"This is also driven by changing customer expectations, investor engagement and patterns of competition in the institutional as well as retail market where the nature of customer experience is evolving at an increasingly high speed. 

“The regulators have a keen focus on ensuring firms build their operational and cyber resilience by testing extreme but plausible scenarios in order to prevent harm to consumers,” he said.

Diversity and inclusion initiatives within the industry will continue to be a valuable disruptor, Cummings added.

“This conversation has moved on from being a matter of social-conscience to one about a better business case; as the focus on culture, diversity and inclusion are a growing focus for asset owners and now regulators, and we see this continuing over the coming years.”

Cummings added the growth in private markets will continue, driven by investors searching for opportunities to further diversify investment portfolios in order to achieve solid, long-term returns and yield in a low interest rate environment.

“The long-term asset fund will offer DC pension schemes and certain sophisticated retail investors a new way to access illiquid investments through a fund structure designed specifically for such investments, with notice periods that are consistent with the time it takes to sell the underlying asset. 

“We are encouraged to see the FCA’s commitment to looking closely at allowing the Ltaf to be sold to a broader range of retail investors with appropriate safeguards, in the future”