Since November 2021, the FCA 3-year Strategy and our ESG Strategy have sharpened our focus on environmental, social and governance (ESG) issues. Our goal is to improve climate and sustainability disclosures for markets and consumers, leading to:
- Better market decisions: Clearer disclosures will inform more accurate pricing and investment choices.
- Increased consumer confidence: Trust in ESG investments will grow with better information.
- Stronger investor stewardship: Active investors will be better equipped to influence companies' sustainability practices.
Fair value
Outcome 1: Trust and consumer protection from misleading marketing and disclosures around ESG-related products
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Metric code |
Metric description |
Source |
Baseline Value |
Year 1 values |
Year 2 values |
Latest status (year 2 value compared to baseline) |
|---|---|---|---|---|---|---|
|
NZE1-M01 |
Increase in quality and quantity of climate-related and sustainability disclosures (metric for quality to be determined) |
FCA and Financial Reporting Council |
Average page length in AFRs – 5 pages (2022) 90% of companies included a statement in their AFR (2022) |
N/A |
We used the FCA/FRC review of climate-related financial disclosures by premium listed commercial companies to measure this outcome. We have evolved our methodology for this metric, which means comparisons between years at this stage are not possible. Instead, we propose to use Financial Lives surveys to measure this outcome in the future, focusing on consumer perceptions of disclosures (NZE1-M02).
|
Not assessed |
|
NZE1-M02 |
Decrease in consumer perception that providers overstate sustainability credentials of funds in their marketing. |
57% of consumers who have any investments (excl. real investments) or a DC pension in accumulation or decumulation and have invested responsibly with their pension savings or other investments, slightly or strongly agree that providers often overstate the sustainability credentials of these funds in their marketing. Only 6% slightly or strongly disagree with this. |
N/A |
N/A |
Not assessed |
Confidence
Outcome 2: High-quality climate- and wider sustainability-related disclosures to support accurate market pricing, helping consumers and market participants choose sustainable investments and drive fair value
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Metric code |
Metric description |
Source |
Baseline Value |
Year 1 values |
Year 2 values |
Latest status (year 2 value compared to baseline) |
|---|---|---|---|---|---|---|
|
NZE2-M01
|
Under development: Monitor the incidence of misleading marketing for ESG products |
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|
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Not assessed |
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NZE2-M02
|
Increase in consumer trust of ESG related products
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FCA Financial Lives Survey (FLS)
|
76% of consumers, who have any investments or a DC pension in accumulation or decumulation, and have invested responsibly with their pension savings or other investments, agree they find it hard to tell which funds genuinely follow responsible investment principles and which are not (2022) |
N/A |
68% of consumers, who have any investments or a DC pension in accumulation or decumulation, and have invested responsibly with their pension savings or other investments, agree they find it hard to tell which funds genuinely follow responsible investment principles and which are not (2023 re-contact survey) Difference between year 2 and baseline value is statistically significant.
|
Improved |
|
FCA Financial Lives Survey (FLS)
|
53% of consumers, who have any investments or a DC pension in accumulation or decumulation, who have invested responsibly with their pension savings or other investments, agree they received enough information to assess how responsible the fund was (2022)
|
N/A |
49% of consumers, who have any investments or a DC pension in accumulation or decumulation, who have invested responsibly with their pension savings or other investments, agree they received enough information to assess how responsible the fund was (2023 re-contact survey)
Difference between year 2 and baseline value is statistically significant.
|
Declined |
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|
NZE2-M03 |
Monitor Enforcement and Supervisory cases of financial crime, fraud, and mis-selling of ESG related products |
Under development |
Under development: Monitor Enforcement and Supervisory cases of financial crime, fraud, and mis-selling of ESG related products
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Since the inclusion of this metric our regulation has evolved and the development of our SDR regime means we will now identify a more structured basis for classifying ESG- related products, linking to metric NZE2-M01. We will therefore retire this metric and focus on the implementation and supervision of the SDR regime. |
Not Assessed |
Outcome 3: Active investor stewardship that positively influences companies’ sustainability strategies, supporting a market-led transition to a more sustainable future
|
Metric code |
Metric description |
Source |
Baseline Value |
Year 1 values |
Year 2 values |
Latest status (year 2 value compared to baseline) |
|---|---|---|---|---|---|---|
|
NZE3-M01 |
NZE3-M01: We are working with industry leaders and other regulators to decide how to develop indicators for the effectiveness of stewardship |
Under development |
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We want to continue to see active investor stewardship that supports a market-led transition to a more sustainable future. There are significant challenges in devising robust metrics to reflect the impact of investor stewardship on companies' sustainability strategies. In practice, there are many factors that affect sustainability, including social and legal factors, so isolating the effect of stewardship activities is challenging. Therefore, for Metric NZE3-M01 we will continue to support active investor stewardship but will retire this metric. |
Not Assessed |
What the latest metric values tell us
We've set clear goals and are developing metrics to track progress for some of our outcomes. Some goals, like trust and disclosure quality, are non-financial and require different measurement approaches. We lack a historical baseline for comparison, so we continue to use:
- Surveys: Assessing changes in consumer trust towards ESG investments.
- Monitoring and feedback: Monitoring marketing practices and collecting information, working closely with our partner stakeholders, such as the Advertising Standards Authority.
For metric NZE1-M01, we used the FCA/FRC review of climate-related financial disclosures by premium listed commercial companies to measure this outcome. We have been developing our methodology for this metric, which means comparisons between years at this stage is not possible. Instead, we propose to use Financial Lives survey to measure this outcome in the future, focusing on consumer perceptions of disclosures (NZE1-M02).
For this new metric NZE1-M02, baseline data shows that 57% of consumers who have invested ‘responsibly’ with their pension savings or other investments slightly or strongly agree that providers of ESG or responsible investment products often overstate the sustainability credentials in their marketing. Only 6% disagree with this statement. We’ll use this data as a new baseline for our future monitoring – while considering the development of additional qualitative metrics. We hope to see this percentage decrease with the introduction of our Sustainability Disclosure Labels.
We are developing metric NZE2-M01 as we identify a robust way to monitor signs of greenwashing from a range of sources in a quantitative dataset. This includes complaints to us, intelligence on quality of applications to Fund Authorisations and broader supervisory intelligence.
For metric NZE2-M02, we’re using data from our 2023 Financial Lives re-contact survey (FLS). The proportion of consumers who have invested ‘responsibly’ and agreed they find it hard to tell which funds genuinely follow responsible investment principles declined from 76% in 2022 to 68% in 2023. Although this shows improvement from the 2022 FLS, we want to see this decline considerably over time.
This is particularly important because the proportion of consumers who have invested ‘responsibly’ and considered they had received enough information to assess how responsible the fund was the last time they invested in this way, declined over the same period from 53% to 49%.
Since we introduced metric NZE2-M03, the development of our SDR regime means we now have a more structured basis for classifying ESG-related products, linking to metric NZE2-M01. So we will retire this metric and focus on the implementation and supervision of the SDR regime.
For Metric NZE3-M01 we want to continue to see active investor stewardship that supports a market-led transition to a more sustainable future. There are significant challenges in devising robust metrics to reflect the impact of investor stewardship on companies' sustainability strategies. In practice, there are many factors that affect sustainability, including social and legal factors, so isolating the effect of stewardship activities is challenging. So for Metric NZE3-M01 we will continue to support active investor stewardship but will retire this metric.