The FCA's ESG investment labelling proposals

The UK has opted to diverge from the EU in its approach to designating the ESG credentials of investments - with a focus on labelling from a retail investor perspective, rather than a disclosure system like its European neighbours. Compliance teams should not delay in assessing how their products will conform to the proposed rules, as well as where the product will fall when moving from one regime to the other, urge Tim Dolan and Voirrey Blount.

Tim Dolan (tdolan@reedsmith.com) is a partner in the Financial Regulatory team at Reed Smith, where Voirrey Blount is a trainee.

One of the first times the term 'ESG' appeared was back in 2004 in the 'Who Cares Wins' report created by an initiative of the major players in the financial industry following a direct appeal from then Secretary-General of the United Nations Kofi Annan, who wrote to the CEOs of 55 of the world's leading financial institutions. It was acknowledged even then that ESG (Environmental, Social and Governance) was going to be of vital importance. Gary M Pfeiffer, then the chief financial officer of Du Pont, stated back in 2004 that: "Every corporation is under intense pressure to create ever-increasing shareholder value. Enhancing environmental and social performance are enormous business opportunities to do just that."