On Monday, in a statement Britain’s Financial Reporting Council said, 125 companies, including Fidelity, BlackRock, M&G, Legal & General, have endorsed Britain’s tougher best practice code to stop “greenwashing” assets, with 64 companies failing to make the cut.
Among the blue chip companies that did not make the grade is Schroders – one of Britain’s leading asset managers.
Asset managers are under greater scrutiny from securities regulators globally to prevent “greenwashing” or exaggerating the climate-friendly credentials of their products to investors.
In 2020, the FRC has revised its decade-old stewardship code in order to stop “boiler plate” statements on investment decision-making which does little to show if investors were getting their value for money.
The code is enforced on an explain or comply basis, which means companies must publicly say why they are not in compliance with it.
The revised code says asset managers should not only spell out their actions in selecting investments, such as meetings with companies, voting at annual meetings, but also provide evidence on what the outcomes of those actions were.
The development comes at a time when Britain is seeking to promote London as a global center for sustainable investment, and is putting great emphasis on taking environmental, social and governance (ESG) factors into accounting while investing.
With the volume of money going into ESG products rising significantly, it has raised concerns among regulators of “greenwashing”.
As a result of the revision of the best practice code, all 300 asset managers who were signatories to the old code had to reapply, said the FRC.
125 signatories have a combined $27.7 trillion (20 trillion pounds) under management, while the total for all 189 applicants was 32 trillion pounds.
Incidentally, several blue-chip companies are not among the signatories; so far it is unclear if they have applied. Some of those who failed to make the grade are expected to reapply in October 2021, or in April 2022.
“We are confident we will be a signatory again soon,” said Schroders.
The FRC said that to remain signatories, organisations will need to continue to improve their reporting as market practice and expectations evolve.
Companies that signed up to the code must state that on their website.
$1 = 0.7230 pounds)