The UK's Investment Association (IA) on 18 November launched its Responsible Investing Framework with a view to standardising green finance language and approaches.
The Framework provides a list and accompanying definitions for Firm-level and Fund-level 'components' - Stewardship, ESG Integration, Sustainability Focus, Impact Investing and Exclusions - which may be used to identify responsible investments.
For example, the component 'Exclusions' is defined as follows:
Exclusions prohibit certain investments from a firm, fund or portfolio. Exclusions may be applied on a variety of issues, including to align with client expectations. They may be applied at the level of:
- Business activity, products or revenue stream
- A company
The Framework does not represent a standard, but is a set of industry-endorsed definitions. It is envisaged that the Framework can be used as a tool for a firm to articulate its responsible investment approach.
Quality assurance and vetting standards would be a separate and dedicated piece of future work, says the accompanying guidance.
Given the size of the IA's membership - it has 250 members who manage £7.7 trillion of assets - this is an important initiative.
The investment management industry has come together to agree a common language and clear product categorisation for responsible investment approaches to help savers better access and compare funds with a focus on environmental or social outcomes. Currently a variety of terms and phrases are used in different ways, which could leave customers confused or unable to find the investment opportunities to match their diverse responsible investment goals. The industry-wide definitions, published today by the Investment Association (IA), aim to provide clarity and consistency for savers, and are based on consultation with over 40 investment management firms, representing £5 trillion of assets.