Investment management update - November 2022

13 December 2022

Welcome to the latest edition of our investment management update. This publication has been tailored to highlight topical news, cases and changes in the law impacting the investment management sector.

Key things to look out for include:

  • a plethora of ESG updates. In the EU, the completion of a new ESG reporting regime, a new names rule for ESG funds, and both EU and Irish guidance on the SFDR. In the UK, a new framework is being created for net zero transition plans and there will be a review of the Stewardship Code;
  • the FCA has proposed a new simplified financial advice regime in an attempt to address the growing "advice gap"; and
  • post-Brexit divergence takes pace with the progress of the UK’s Financial Services and Markets Bill, while the EU indicates further review of non-EU firms’ ability to market their services in the EU.


  • On 30 November, the FCA published a consultation on a simplified financial advice regime. The proposals seek to provide a lower cost and easier advice process for mass market retail investors in stocks and shares ISAs. The FCA proposes to do this by removing or reducing certain regulatory requirements; however, it does not propose to reduce firms’ legal liability should a customer wish to complain to the firm or to the Financial Ombudsman Service or pursue a legal remedy against perceived mis-selling. The FCA aims to address the growing advice gap that emerged because of the Retail Distribution Review’s ban on third-party inducement payments. The consultation will close on 28 February.
  • On 25 November, the Financial Reporting Council (FRC) published its annual Effective Stewardship Report. The FRC notes improved stewardship reporting across a range of areas including company engagement, monitoring of third parties, and an extension of stewardship beyond listed equities into fixed income and real estate asset classes. The FRC makes recommendations for improvements, referring to its Stewardship Code and its principles, including reminding firms to update their reporting each year to remain signatories to the Code. The FRC will begin a review of the Code with a consultation in late 2023. Asset managers and service providers may apply to be a signatory until 30 April 2023, after which, only renewal applications from existing signatories will be accepted until the review of the Code is complete.
  • On 24 November, the Productive Finance Working Group published a series of guides on the LTAF for DC scheme trustees and a model OEIC instrument of incorporation. The series of guides cover value for money, performance fees, liquidity management, fee structures for less liquid assets, a legal guide, and due diligence. The FCA also published a webpage about LTAF pricing and valuation.
  • On 17 November, the Treasury published its response to its consultation on reform to the UK prudential regime for insurers, Solvency II. The Government has confirmed that it will seek to reform risk margin, freeing up capital that it hopes insurers will deploy to long-term investments. The Government was reported to be at loggerheads with the Bank of England, and HMT’s response confirms that it has rejected the PRA’s proposals that were criticised by the industry as undermining the wider aims of releasing capital. You can read more about the reforms in our brief. The Solvency II reforms will be delivered via the Financial Services and Markets Bill – more on which is provided below.
  • On 8 November, the Transition Plan Taskforce (TPT) launched its TPT Disclosure Framework to assist entities to disclose credible, useful, and consistent climate transition plans. The framework recommends how companies and financial institutions can achieve ‘gold-standard’ transition plans and the TPT also provides practical guidance on the development and disclosure of their plans. The TPT Disclosure Framework builds on existing recommendations to disclose transition plans under the TCFD Recommendations as well as transition plan disclosure recommendations in the ISSB’s proposed standards. The creation of the TPT was announced last year at COP26 and the group is co-chaired by Aviva’s CEO Amanda Blanc and the Economic Secretary to the Treasury, Andrew Griffith. The framework is not mandatory although the FCA has said that it will use the TPT’s outputs to develop its own expectations of firms’ disclosures. The announcement was made after the Prime Minister’s appearance at COP27 on 7 November.
  • The Financial Services and Markets Bill is progressing through Parliament, currently having passed the third reading in the Commons before the third and final reading ahead of consideration in the House of Lords. The Bill proposes to give the FCA and the PRA new secondary objectives, including acting to achieve the Government’s statutory net zero emissions target. It is expected that some in the House of Lords might propose amendments to strengthen the likelihood of the regulators achieving the net zero target and holding them accountable to do so. If these amendments are included in the final legislation, regulators may take a stricter approach to ESG regulation and supervision to achieve their statutory objective.


  • On 29 November, Macfarlanes published an article on developments in EU "substance" requirements. The article alludes to comments made by the Central Bank of Ireland’s director for conduct policy and to ESMA’s proposals for additional requirements for cross-border tied agency passporting. The article concludes that the EU’s new AIFMD and MiFID II rules requiring additional transparency for non-EU firms (not only UK firms) in relation to their EU business be a precursor to further restrictions on the delegation of portfolio management activity to service providers outside of the EU and on non-EU firms marketing their services in the EU.
  • On 28 November, the European Council approved the Corporate Sustainability Reporting Directive (CSRD), new legislation that will mandate large and listed issuing companies to make ESG-related disclosures. The European Commission estimates that around 50,000 EU companies will be in-scope, while non-EU companies with a large EU-based subsidiary or branch will also be required to report. The legislation will soon be published in the EU’s Official Journal. The first wave of companies will be required to report from 2025 in respect of the 2024 financial year. Non-EU companies (of which there has been no announced estimate of those in scope) must report from 2028.
  • On 18 November, ESMA began a consultation on a proposed new “names rule” for ESG funds. The proposed guidelines seek to combat greenwashing by setting standards, by way of pan-EU guidelines, on the use of sustainability-related terms in fund names. The consultation proposes (i) that a fund with any ESG-related terms in its name must have a minimum proportion of at least 80% of its investments in assets that promote environmental or social characteristics or sustainable investment objectives; and (ii) that a fund that has “sustainable” or a word derived from “sustainable” in its name must also have a minimum proportion of at least 50% of its investments in “sustainable investments”. This latter requirement sets a minimum standard for Art 8 funds with “sustainable” in the name under the SFDR. ESG-positioned funds must also achieve minimum safeguards in respect of investment exclusions and in relation to ESG benchmarks that are referenced. The consultation will close on 20 February 2023. The guidelines are subject to change before they are finalised and published in Q2 or Q3 2023. The rules will take effect three months later. Funds launched before the rules take effect will be given a six-month transitional period to comply.
  • On 17 November, the European Supervisory Authorities (ESAs) published a set of Questions and Answers (Q&As) on compliance with SFDR Level 2 rules, which take effect on 1 January 2023. The document spans 60 questions over the following general topics: current value of all investments in PAI and Taxonomy-aligned disclosures, PAI disclosures, financial product disclosures, multi-option products, Taxonomy-aligned investment disclosures, and financial advisers and execution-only FMPs. The ESAs have requested further clarifications from the European Commission on the precise definition of “sustainable investments” under the SFDR. EFAMA and Eurosif have criticised the clarifications as potentially creating “a huge administrative burden” for asset managers to demonstrate compliance, and difficulties in qualifying as an Article 9 fund if an overly prescriptive definition is proposed.
  • On 15 November, the ESAs issued a joint Call for Evidence on greenwashing in the financial sector. The regulators seek to collect information via a survey about the main features, drivers, and risks that lead to greenwashing practices. The consultation will close on 10 January 2023. The ESAs will provide a progress report to the European Commission by May 2023 and a final report by May 2024. The evidence gathered will inform ongoing EU policymaking and supervision.
  • On 11 November, the Central Bank of Ireland (CBI) published a paper advising firms on good practices in relation to their ESG disclosures and its expectations for the implementation of the SFDR and the Taxonomy Regulation. The conclusions are derived from the CBI’s “gatekeeper review” of a sample of SFDR disclosures that it received in relation to SFDR Level 1 and the Taxonomy Regulation. In addition to its commentary on specific sections of the SFDR and Taxonomy disclosures, the CBI states throughout its expectation that disclosures must be specific to the fund in question and that firms should regularly review their disclosures. The CBI will undertake a similar retrospective review of a sample of submissions that it receives for compliance with the SFDR’s Level 2 rules, which take effect on 1 January 2023.


  • On 18 November, Glass Lewis published its updated proxy voting policy guidelines. The guidelines cover Canada, Continental Europe, the UK, the US, and ESG initiatives specifically (the latter policy outlining how Glass Lewis proposes to vote on an issue-by-issue basis). The new policy will apply from 1 January 2023.
  • On 11 November, Macfarlanes publishedESG: safeguarding against the risks”, in which we suggest guiding principles that decision-makers should consider in the context of mitigating key ESG-related litigation and regulatory risks. The article addresses the following key ESG risks: litigious innovation, greenwashing litigation and misinformation, biodiversity, failure to keep pace, and regulatory risk.
  • On 8 November, a group of asset managers and trade associations in the private credit and syndicated loan markets announced the launch of the ESG Integrated Disclosure Template (ESG IDP). The template aims to promote greater harmonisation and consistency of disclosure of key ESG indicators by borrowers in private credit and syndicated loan transactions. The ESG IDP is led by the Alternative Credit Council (the private credit arm of the Alternative Investment Management Association), the Loan Syndications and Trading Association, and the United Nations-supported Principles for Responsible Investment.
  • On 4 November, Institutional Shareholder Services (ISS), published its 2023 benchmark policy consultation. ISS is a proxy advisor that advises institutional investors on their votes on major matters at investee company AGMs. Its benchmark policy sets out how it will generally recommend investors vote on certain issues. The consultation recommends an extension of ISS’ 2022 policy, which recommended voting against items for high carbon-emitting companies. ISS now suggests extending the terms of “high emitting” to include a lack of emission targets or inadequate disclosure of climate risk information. It also proposes to extend the policy beyond its larger markets, such as the US and the UK, in which it was initially implemented. The short comment period closed on 16 November and ISS announced the finalization of the policies on 1 December to be implemented from February 2023.