Majority of managers say greenwashing is a problem

New figures from IIMI, a boutique asset management think tank, found that 61% of its members believe the FCA’s guiding principles on the design, delivery, and disclosure of ESG and sustainable funds to be a positive development for the industry.

Furthermore, 69% of IIMI members support the FCA’s proposals to require fund managers to provide disclosures based on the Financial Stability Board’s recommendations in the Task Force on Climate-related Financial Disclosures (TCFD).

Independent Investment Management Initiative (IIMI), formerly New City Initiative (NCI), is a think tank focused on the future of financial regulation. Founded in 2010, IIMI counts 43 independent asset management firms as members, from the UK and Europe, managing approximately £500bn.

Key findings from IIMI’s latest report include:

61% of IIMI members believe the FCA’s guiding principles to be a positive development for the industry. When those in support of the principles were asked why:

• 52% said they would help combat greenwashing.
• 22% argued they will be beneficial to fund competition and ESG benchmarking.
• 22% believe they will help ensure internal support for responsible investment.

88% of members believe the fund management industry has a problem with greenwashing.

69% of membership have welcomed the FCA’s proposals on TCFD (Task Force on Climate-related Financial Disclosures) reporting: 41% said the TCFD is the best ESG reporting template available.

When asked about the biggest challenges of the FCA’s proposals on climate-related disclosures:

• 46% said the rules risked creating further complexity.
• 31% were worried about costs.
• 27% expressed concern about the possibility of duplication.

IIMI members are fairly split about whether they intend to grow their ESG teams:

• 38% told the survey they had no plans to expand their ESG teams in the next 12 months.
• 35% said they will increase headcount.

IIMI members are equally unsure as to whether their ESG teams will rival their regulatory compliance teams in terms of size in the next two years: 38% said yes and 38% said no, with the remainder being unsure.

81% of IIMI members want to see more standardisation of ESG reporting globally.

Nick Mottram, chair of IIMI commented: “IIMI fully supports the FCA’s guiding principles and proposals to make TCFD reporting mandatory as it believes this will root out greenwashing, which we and the vast majority of our members believe to be a problem in the industry – and one that we are looking to counter. However, the UK must carefully consider the unintended consequences of potential overlap and divergence with other ESG regimes. With more markets increasingly adopting ESG legislation, an element of standardisation is required or it could create further confusion, which is clearly a concern among our members. This is something that IIMI is willing to engage with regulators about.”

The full results of the survey are included in IIMI’s paper “New UK ESG Regime: Backed by IIMI Members”.