New EU investor duties should mirror UK’s to prevent Brexit impact, warns UKSIF

UK Government expected to clarify fiduciary duty rules this year

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The UK Sustainable Investment and Finance Association (UKSIF) is urging its members to call for investor duties in Europe to be based on fiduciary duty rules in the UK.
UKSIF is encouraging investors to participate in the public consultation currently underway by the European Commission on investor duties. The consultation, which closes next week, is the first step in responding to one of the early recommendations put forward last summer by the High Level Expert Group on Sustainable Finance – that a Europe-wide obligation be placed on investors to consider sustainability in their decision-making. The responses to the consultation, which launched in November, will form the basis of new rules on European investment mandates that incorporate ESG criteria.
“We welcome the HLEG recommendation that a universal concept of fiduciary duty is established at the European level, and it is important the European Commission takes this forward,” said UKSIF in a statement. However, it added “that the EU policy should broadly mirror the UK’s approach, so that no gaps appear post-Brexit”.
The only legally-binding UK rules on fiduciary duty that address ESG are The Occupational Pension Schemes (Investment) Regulations from 2005, which have been criticised being unclear and outdated.As a result, in 2014, the UK Law Commission published a report on the topic, recommending that the Government change pension regulation to fully clarify that funds should consider sustainability in investment decisions. The Government did not take up these recommendations, and they were reiterated by the Law Commission in another report last summer. In December, the UK Government confirmed that it was now “minded” to change the law accordingly. UKSIF claims it is “probable” that there will be a UK consultation on fiduciary duty this summer in order to establish the wording for these amendments.
“We think UK and European thinking on this topic should be aligned, as should the introduction of any new legislation,” said UKSIF, pointing to the risk that following Brexit the UK will have to have its own guidelines regardless of whether a pan-European version is developed.
UKSIF also warned that “while clarification of investors’ duties is a useful step forward, excessive proscription in terms of what factors are considered and how it is to be done would be unhelpful”.
The European Commission’s consultation on investor duties finishes on January 22nd. To take part, see here. For UKSIF’s suggested responses to the survey, see here.