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'No common approach' to ESG standards

'No common approach' to ESG standards

Monday 05 February 2024

'No common approach' to ESG standards

Monday 05 February 2024

A study looking into ESG standards across the financial services sector has found there is "no common approach amongst investment trust companies", says JTC Group.

It analysed the work of 375 investment companies, saying it revealed "varying levels of adoption of eight separate ESG standards".

Commenting on the varying ESG standards adopted by different investment trust companies, David Vieira, JTC Group Head of Sustainability Services, said: “These findings are significant for the Channel Islands, which are major and growing investment fund hubs and have ambitious sustainable finance strategies.

“The report highlights what we have observed for some time, which is that market participants such as investment trusts and their clients are searching for ESG disclosures that follow the Goldilocks principle. They can’t be too generic or too specific, but need to be ‘just right’ to provide the information needed for investors to make decisions.

"While regulators and standards bodies have generally expressed a desire for sustainability disclosures and financial disclosures to be combined within one inclusive disclosure, the reality is that sustainability disclosures must adapt to the huge variety of underlying investment types in a way that financial disclosures don’t. There is no magic bullet, but a general trend towards the consolidation of standards globally, as opposed to increased arbitrage, would be welcome progress and ultimately a positive direction of travel for the industry as a whole and investor confidence in ESG disclosures.”

The publication of the JTC Group study comes some six weeks after the Financial Conduct Authority’s PS23/16 Sustainability Disclosure Requirements which states that the FCA “wants to see a level playing field for all firms operating across the market to maximise the benefits of the regime for consumers".

Richard Stone, Chief Executive Officer of the Association of Investment Companies (AIC), added: “As this report demonstrates, investment trusts have adopted a range of different standards and frameworks for their ESG reporting. The board of every investment trust must make a judgment on which standards or frameworks, if any, are relevant to its strategy. We are a diverse sector investing in everything from mainstream equities to wind farms, from healthcare properties to space technology. Given this diversity it is inevitable that, as the report highlights, the extent to which individual investment trusts highlight ESG issues, adopt specific standards, or promote their ESG credentials will vary significantly.”

Pictured top: David Viera, JTC Group Head of Sustainability Services.

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