Fortnightly News Blog – 30th September 2021

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Schroders to include sustainability data in next AoV report

Schroders will include sustainability data at an individual fund level within its next Assessment of Value (AoV) report, according to various reports. Portfolio Adviser writes that the firm’s 2022 report will include insights around active ownership, supported by its proprietary measurement tool impactIQ which helps quantify the potential social and environmental impact of clients’ investments.

The firm’s 2021 AoV report, published in April, concluded that nine out of 89 funds did not demonstrate “value”. The firm was also one of the major asset managers missing from the Financial Reporting Council’s 125-strong successful UK Stewardship Code list published in early September.

But industry opinion is split. While others have applauded Schroders for its “brave” move, JB Beckett, iNED for Royal London and SVM, told Investment Week (subscription required): “As there is no prescription yet, there will be no consistent approach to including sustainability in reports. Where is the independent scrutiny or objective quantification? I will believe it when I see it.”

To read Schroders’s two AoV reports, visit FBC’s AoV Report Bank. Access is restricted to FBC corporate members only.

And to find out more about how FBC helps authorised fund management (AFM) firms improve their AoV reporting processes, watch this video to find out more about FBC’s Assessment of Value Assurance Review (AoVAR) service.  

ESG: Reputational risk now main driver of integration

New research by BNP Paribas suggests that when it comes to ESG integration within the fund management industry, reputational risk has become the main driver. This particular takeaway from the report, which surveyed 356 institutional investors across Europe, North America and the Asia Pacific, chimes with recent accusations of greenwashing against firms such as DWS and BlackRock.

Separately, Invesco has announced that it is rolling out a twice-yearly review to gauge the extent of ESG integration across its global investment teams, reports Ignites Europe (subscription required). A spokesperson said the reviews will discuss ESG factors covering ESG ratings, climate-related issues, engagements, proxy records, as well as non-ESG strategies.

The full BNP Paribas report is available to read here.  

SFDR: How are firms classifying their funds?

The Sustainable Finance Disclosure Regulation (SFDR) reporting requirement came into effect earlier this year. It aims to make it easier for investors to understand whether a fund is making ESG considerations when investing. European funds are now classified in three groups: funds that “promote environmental or societal characteristics” are labelled “Article 8”, funds that have “a sustainable objective” are labelled “Article 9”, while funds that do neither are labelled “Article 6”.

Portfolio Adviser reports that at the 20-day mark, Morningstar had examined half the 5,695 Luxembourg-domiciled funds and 21% had been classified as Article 8 or 9. Four months later, when it had examined around 82% of funds in the market, Article 8 and 9 funds made up nearly a quarter of the market.

This Morningstar article provides additional, helpful reading on SFDR.

This online event is the first in a series of FBC meetings on the topic of Responsible Investing. It will address the basic question of the role and responsibilities of fund boards and senior executives. For FBC corporate members only.  

FCA: Tackling consumer harm

The FCA has published its strategy on how it will tackle investment harm to consumers. According to the regulator, over 23,000 consumers lost an estimated £569m to investment fraud from April 2020 to March 2021, an almost threefold increase since 2018.

The new strategy aims to give consumers the confidence to invest, supported by a high-quality, affordable advice market, which should lead to fewer people being scammed or persuaded to invest in products too risky for their needs. The regulator will publish wholesale and retail strategies to set out the ambitions for these markets in early 2022.

Fiona Nicolson of FT Adviser conducted some analysis on the strategy, and her colleague Amy Austin pulled out five key takeaways from it.  

Bolster investment funds, urges IMF

After the Covid-19 crisis exposed “fundamental vulnerabilities” in the fund investment sector, the International Monetary Fund has called on policymakers to bolster investment funds to ensure that any likely threat to global financial stability is averted. Speaking to the Financial Times (subscription required), Tobias Adrian, the fund’s director of monetary and capital markets, said: “We need to boost the resilience of investment funds to safeguard financial stability and to better protect markets and economies from crippling capital outflows.”

But the Investment Company Institute (ICI), a global trade body for asset managers, said in a statement: “We know of no compelling evidence of this. The March 2020 turmoil was driven by investors of all stripes — not just investors in regulated funds — seeking liquidity in the face of unprecedented uncertainty caused by the emerging global pandemic.”

A summary of the IMF’s report is available to read here.  

LTAFs: Retail clients must be included

A UK-government backed working group has recommended that distribution of the future Long-Term Asset Fund (LTAF) be widened to include “appropriate retail clients” as part of efforts to increase investment in illiquid assets, reports Ignites Europe. The Productive Finance Working Group’s statement comes off the back of a recent consultation by the FCA (CP21/12) where it set out proposals for a new category of authorised open-ended fund.

In June, law firm Fieldfisher published an article entitled, The UK’s new Long-Term Asset Fund – what do you need to know? which answers a number of questions on this new fund type.  

People on the Move – Recent Appointments

Dame Elizabeth Corley has joined the Schroders board as a non-executive director, member of the Nominations Committee and Chair designate. She is currently a non-executive director of Pearson plc, BAE Systems plc and Morgan Stanley. She is also Chair of the Impact Investing Institute.

Debbie Clarke has joined BlackRock EMEA in a non-executive director role. She was previously at Mercer where she worked as Director of Investment Research. Prior to Mercer, She began her career as a portfolio manager for F&C Asset Management, where she spent 20 years from 1983 to 2003.

FBC takes no responsibility for the accuracy or quality of the news in the links provided above, and nor are the views and comments representative of FBC or its members, unless expressly stated. In some instances, as indicated, a subscription is required to access certain news articles, and content stored on the FBC portal is freely accessible for FBC members.