Funds Focus Q4 2021
Published on 2nd Dec 2021
Welcome to the latest edition of Funds Focus. This year, the drive towards green finance and sustainable investing continues apace, with both the UK and the European Union (EU) progressing their regimes on sustainable disclosures and green taxonomy. We take a look at environmental, social and governance developments on both sides of the Channel as well as internationally.
The new EU rules on cross-border distribution of funds, which went live from this summer, have raised fresh questions about the ability of third-country managers to access capital in Europe, just in time for the long-anticipated review of the Alternative Investment Fund Managers Directive.
In November, the UK saw the creation of a brand new fund vehicle, the long-term asset fund, which aims to unlock the investment potential of long-term illiquid asset classes such as private equity and venture capital.
The Financial Conduct Authority's work is never done: in its recent perimeter report, the UK regulator trailed some forthcoming reforms that are likely to impact the investment funds industry, including changes to the appointed representatives regime and the exemptions for financial promotions.
Osborne Clarke's fund formation and regulatory experts are well placed to advise you further on any of the topics covered in this edition of Funds Focus. For further information please contact the authors of the relevant articles or one of our funds partners: Helen Parsonage, Alison Riddle, Tim Simmonds, and Simon Thomas.
Finance goes green: UK plans roadmap to sustainable investing
The UK government has published its long-awaited policy paper on "Greening Finance: A Roadmap to Sustainable Investing" (18 October), which sets out a three-phase plan to cement the UK's status as a world leader in green and sustainable investment.
FCA unveils proposals for UK sustainability disclosure regime
Consumers care about the environmental, social and governance impact of their investments. Over 70% of respondents to the UK Financial Conduct Authority's recent Financial Lives 2020 survey said they wanted to "invest in a way that is protecting the environment".
To meet this demand, sustainable investment products are burgeoning in number and diversity, offering choice but also the potential for confusion. The regulator is concerned that, without shared standards, clear terminology and accessible product classification, consumers could be left struggling to understand these products and whether they are suitable investments.
The Sustainable Finance Disclosure Regulation: the latest piece in the puzzle
On 22 October 2021, the European Securities and Markets Authority (along with the other European Supervisory Authorities (ESAs)) issued draft Regulatory Technical Standards (RTS) on taxonomy-related product disclosures under the EU's Sustainable Finance Disclosure Regulation (SFDR). The draft RTS amends the existing SFDR RTS. This aligns with the ESAs' desire to create a "single rulebook" for sustainability disclosures.
Since the time of writing, the RTS have been delayed again – they will now apply from 1 January 2023.
ILPA releases its ESG Assessment Framework
Concepts such as "climate", "environment", "sustainability", "diversity", "governance" and "inclusion" have become commonplace in the business world. Recently, there has been a clear shift in societal consciousness with many businesses now choosing to focus on or implement policies that are mindful of environmental, social and governance factors. Limited partners have also started to analyse and exert more pressure on the partners they work with, scrutinising their internal ESG policies and procedures and calling for integration of ESG into business practices.
Uncertainty remains around new EU pre-marketing rules
The new EU regime on the Cross-Border Distribution of Funds, intended to harmonise approaches to marketing alternative investment funds across the bloc, has been live since 2 August 2021. In November 2020, we shared our technical guide outlining the expected changes. A year on, how are the rules on pre-marketing bedding down?
The UK Long-Term Asset Fund has arrived
Managers, investors and all those in tune with the UK’s asset management industry were greeted with the news in November that the Financial Conduct Authority had finalised the rules for the new UK Long-Term Asset Fund, initially consulted on in May 2021.
UK financial watchdog's perimeter report calls for legislative change to protect consumers
The Financial Conduct Authority's recently published annual perimeter report (October 2021) suggests a series of reforms to protect consumers, which could have a significant impact on the investment funds sector and require the industry to re-evaluate its activities.