Sustainability Disclosure Requirements and Investment Labels – Law Society’s Response


The Financial Conduct Authority (FCA) Discussion Paper (DP21/4) invites comments on potential design approaches:

  • sustainable investment labels
  • consumer disclosures for investment products
  • client and consumer – and product – level disclosures by FCA-regulated asset managers and owners

Our point of view

What should be the approach?

The main objective of the FCA document is to help consumers make effective choices when it comes to sustainable investments.

The approach to achieving this should be to enable consumers to identify precisely and easily where particular categories of investment fall on a spectrum from unsustainable to sustainable.

Without unnecessarily duplicating work within the sector, the aim should be to:

  • make this identification simple
  • to encourage and enable companies, investors and products to move forward on this spectrum of sustainability for the benefit of all investors, society and the natural world

Our recommendations

In our response, we comment on the need to:

  • clarity between broader environmental and social features
  • objective and descriptive rather than subjective labels

We support entry-level criteria defined at the entity level, as well as at the product level.

We emphasize the importance of encompassing active stewardship approaches to achieve relevant goals.

We also comment on practical issues, such as:

  • the need to consider applying the rules to existing investments
  • a variety of boundary and definitional issues (for example, on the proposed distinction between “responsible” and “sustainable” investments)

We call for a sequential approach that recognizes that corporate issuer disclosures form the basis for both investor-facing and product-related disclosures.

What this means for lawyers

As companies in the financial sector offer an increasingly diverse range of products that target various sustainability goals, themes or characteristics, this consultation should be of interest to them and the lawyers advising them.

In a rapidly changing environment, our brief seeks to inform a credible and practical approach to achieving FCA’s policy objectives in this area.

We support measures to provide useful signage to consumers and to ensure labels and disclosure requirements have a consistent relationship to the underlying legal position.

Next steps

The consultation closed on January 7, 2022.

The FCA says this discussion paper will help it develop proposed rules in this area.

A new consultation on these rules is planned during the second quarter.

Read the consultation on the FCA website