Investment fund data and technology company FE fundinfo has called on the FCA to educate consumers on the classifications and labels proposed under the UK’s Sustainable Disclosure Requirements.
FE fundinfo regulation manager Mikkel Bates warned that many consumers may not fully understand terms such as ‘transitioning’ and ‘aligned’ funds without further help, which may result in some investors shunning certain funds.
Bates said: “Transitioning funds are definitely the stand out in terms of both labelling and the description of their activities. It is important that consumers are aware that a low allocation to taxonomy-aligned activities is not necessarily an indication of unsustainable investment, especially as many holdings in a transitioning fund would naturally be shunned by many sustainable investors. They need to be made aware of the intention to drive the transition.”
According to Bates, a potential solution for consumers could be a programme which builds on the Investment Association’s Responsible Investment Framework, which was designed to get the industry using the same language for the same concepts. A consumer-facing ‘factsheet’ produced by the FCA and shared by advisers and fund groups would help ensure consumers are able to understand the terminology being used.
Bates added: “We are concerned about the number of different documents retail investors are given pre-sale, especially if the intention is to add an ESG factsheet to the list. The more documents that are added to the KIID/KID, suitability letter, marketing factsheet and other pre-sale information, the less likely consumers are to read any of them.
“We would prefer the disclosures to form the basis of a new type of disclosure document for all funds, to include much of the information on the current KIID/KID. It is also important for consumers to be able to compare the key disclosures from different funds.”
