The hope is that by increasing corporate disclosures on key issues like carbon emissions – and hopefully soon nature loss also – investors will swiftly send signals to company management and encourage them to adopt higher standards.
However, given what we have experienced – both in terms of our changing climate and how slowly companies change their ways – we also need to direct far more capital towards solving problems.
Investors need to turbo-charge lower carbon and resource-efficient industries.
The role of data also needs to be thought through more carefully.
None of this is easy. But if we can strike a better balance between real-world knowledge, regulation, data and ambition – and collaborate internationally with the necessary urgency – financial markets will help protect the planet, people and themselves.
FTA: Who is responsible to make ESG work for both investors and the cause – is it the fund industry, government or the regulator?
JD: Industry, regulators, government, NGOs and end investors all have a role to play in making markets work better and improving what many now call ESG. However, none is responsible for the market.
One key fact that is often overlooked is that the way investment markets – and ESG – works, was not ever ‘planned’. We do not live in a ‘planned economy’.
ESG, sustainable investment and ethical options evolved as legitimate business responses to client demand and emerging risks and opportunities.
I do not expect this to change – which is why I like the FCA’s reference to the need for ‘guardrails’.
Clients need to be confident that their expectations will be met by asset managers – particularly regarding where funds invest – but there is no use the FCA or anyone else trying to second guess tomorrow’s client concerns with any precision.
FTA: What is your view on the government’s work to introduce new ESG regulations, including the obligation for advisers to offer ESG investing to their clients?
JD: From what I have seen so far, the FCA’s work has been very solid. I am of course biased, because I have been part of the process – but they have been consulting extensively, researching end client opinions and listening to feedback – all of which is important.
Their approach, which we understand to be high-level, client-friendly labels, coupled with better information flows, should enable growth and diversity without shackling our industry.
We do not expect specific rules for intermediaries just yet. However, it is important to remember that advisers have been required to know their clients and offer appropriate products for many years.
