Common language on responsible investment

The investment management industry has long struggled with forming a common language and clear product categorisation for responsible investment, however the Investment Association (IA) has now published a common seyt of definitions to provide clarity and consistency for savers, based on consultation with over 40 investment management firms representing £5 trillion of assets.

Investment managers are being encouraged to adopt the framework and definitions, which reflect the wide range of responsible investment approaches, including commonly-used terms such as: ESG integration, stewardship, impact investing, exclusions and sustainability focus.

As part of the IA’s aim to help savers navigate the sustainable and responsible investment fund market, the trade body is continuing to explore the creation of a UK retail product label. More than 8 out 10 firms (85 per cent) which responded to the industry consultation support a fund-level label. Providing clarity to investors was the single most cited reason for establishing a label, with firms also keen to highlight the UK’s role as a global leader within sustainability and responsible investment.

Chris Cummings, chief executive of the IA, said: “Today’s savers want to understand the impact of their investments on the world around them. One significant barrier to the growth of responsible investment has been the lack of a common language and framework that describes and categorises these approaches and products. The agreement of industry-wide definitions provides consumers with that much-needed clarity and choice. The investment management industry can now give its customers a clear picture of the opportunities available to them and the confidence that their chosen product matches their expectations. This is a new milestone in making it easy for people to choose a responsible investment.”

The move has been welcomed by the FCA, and from the start of next year IA members will be asked to identify which funds should be classified as having responsible investment characteristics to help bring further clarity to this market.

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