The working group set up by the Financial Conduct Authority to look into ESG rules and financial advice needs to look at rules around suitability, according to guests on the latest FT Adviser Podcast.
Luke Murray, a consultant at regulatory consultancy firm Bovill, said he had spoken to advisers who said there was a need for clearer rules on this area.
He said: "We know that with FCA rules there are no specific ESG preference requirements as of yet. There is a lot of guidance up there already and we know that across in Europe there is guidance under the Mifid rules as well.
"I think a lot of financial advisers are quite keen to see if the FCA will bring in requirements more targeted at the financial advice space looking particularly looking at suitability for retail consumers and their ESG preferences."
Matthew Connell, director of policy and public affairs at the CII, said that around the time of Cop26 in 2021 which the UK hosted, the government published a statement pledging to look at more requirements for advisers - including the potential requirement for advisers to initiate the conversation on ESG.
He said: "Since then it has been a bit frustrating because when you get the authorities saying there is going to be a requirement and then not actually clarifying what it is, you can get a bit of retrospective regulation slipping in when the requirement is finally defined.
"On the other hand the one good thing that has come out is that we can learn a little bit from what happened in Europe because in Europe they went down quite a prescriptive route, quite a parent-child route of the autorities telling advisers what to say.
"One thing you can say about the FCA is they have put the horse before the cart by talking about the labels first and then moving on to the adviser requirements."
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damian.fantato@ft.com