Advisers should also maintain awareness of the developing ESG regulatory framework, particularly in relation to requirements for product- and entity-level disclosures.
In addition, they should recognise the prospect of new rules applying directly to them: in November 2021, the FCA stated that it was exploring “specific sustainability-related requirements” for advisers and would develop proposals in due course.
Finally, recognising that many UK firms are subject to EU rules in respect of their EU business, advisers should remain familiar with the developing EU framework (where relevant).
FTA: What can/should advisers do to guard against potential litigation and regulatory action?
WC: Overall, advisers should maintain a high level of awareness of the diverse potential risks which could arise in the context of ESG disclosures and greenwashing, including those outlined above.
Some practical considerations include:
1. Reviewing compliance with existing professional standards and duties to customers through the lens of ESG investing, including in respect of communications with customers, research and due diligence, and suitability considerations.
2. Providing relevant training to staff, establishing ESG-specific policies and procedures, and monitoring compliance on an ongoing basis.
3. Keeping abreast of the proliferating regulatory framework for ESG disclosures.
William Charles is disputes partner at international law firm Milbank LLP
