Investment management update - January 2023

14 February 2023

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.


  • On 30 January, the Department for Work & Pensions (DWP) published a consultation, jointly with the FCA and TPR, on value for money assessments for DC pension schemes. The proposal aims to shift DC scheme trustees’ focus from costs to consider broader value delivered to scheme members in the longer term. The consultation will close on 27 March.
  • On 30 January, the DWP also published a response to its consultation on broadening the investment opportunities of DC pension schemes. The policy statement confirms that well-designed performance fees will be excluded from the DC charge cap. The policy aims to help DC schemes invest in illiquid assets, including funds such as the LTAF that might charge carried interest. The changes will take effect from 6 April 2023. The Government also confirms that it will require DC schemes to create policies on illiquid assets and to disclose their asset allocations. The policy aim is to nudge DC scheme trustees to consider whether more illiquid investments might result in better long-term value for scheme members. The new requirements will take effect from 1 October 2023.
  • On 30 January, the Financial Reporting Council (FRC) published an ‘ESG Statement of Intent’. The update details the actions that the accounting regulator plans to undertake in respect of ESG reporting and summarises the actions that it has undertaken over the past 18 months. The FRC announced that it will undertake audit spot checks on firms to assess the quality of their reporting against FRC guidance published in 2022. The quality checks follow the results of a thematic review published in December 2022 that found only a minority of firms retained climate change expertise to address risks and emerging issues. The FRC’s guidance concerns TCFD-aligned reporting and broader considerations of ESG reporting best practice. Later in 2023, the FRC will publish updated guidance, taking account of the upcoming Sustainability Disclosure Requirements, and will also update the UK Corporate Governance Code.
  • On 25 January, the CEO of the Competition & Markets Authority (CMA), Sarah Cardell, said that the CMA proposes to issue guidance clarifying that the CMA would not take enforcement action against asset managers and insurers that collaborate on climate change initiatives, potentially breaching competition rules. It will consult in February on a proposal to ease the application of the rules. However, on 26 January, the CMA also announced that it is expanding its work on greenwashing via probes into companies’ ‘green’ claims. Companies will be assessed against the CMA’s 2021 Green Claims Code.
  • On 25 January, the FCA published the results of a multi-firm review of firms’ Consumer Duty implementation plans. The review considered larger firms. While there were examples of good practice, the FCA highlights several areas for improvement including: effective prioritisation, embedding the substantive requirements, and working with other firms in the distribution chain. The FCA puts emphasis on firms’ data strategies, and the importance of the end of April deadline for manufacturers to engage with distributors to provide the information that distributors need to comply with the rules. The FCA will continue to engage with firms on their implementation plans and progress, will survey smaller firms, and will issue letters to firms addressing sectoral-specific risks.
  • The FCA’s consultation on its draft rules for the Sustainability Disclosure Requirements (SDR) closed on 25 January. Industry feedback largely supported the proposals, but sought clarifications, particularly on the proposed product labelling regime. Macfarlanes submitted a response to the FCA, drawing on the firm’s practical experience advising managers on the full spectrum of funds and asset classes from private markets to public and listed assets. You can read the executive summary here and find a link to the full response.
  • On 13 January, the Government published a review of its net zero plans, led by the former Energy Minister Chris Skidmore MP. ‘Mission Zero’ contains 129 recommendations, including an overarching government strategy to be developed by the end of 2023 and a focus on incentivising green investment. The overall tone of the report is that net zero transition is a “historic opportunity” for the country, and can be achieved in a pro-growth way, but transition will require policy clarity and coordination. The report addresses areas such as economy-wide disclosures, infrastructure, reforming the planning system, and energy efficient homes. The Government will decide in due course whether to adopt some, all, or none of the recommendations. The review follows the High Court’s judgement in July 2022 that the Government’s previous net zero strategy did not fulfil the Government’s obligations under the Climate Change Act because the strategy contained insufficient details of how it would be achieved. You can read more in our analysis of the report.
  • From 29 December through January, the FCA released a series of podcasts about the Consumer Duty. The three episodes released so far consider: the price and value outcome, the products and services outcome, and the consumer understanding outcome. The FCA pages also contain links to transcripts of the episodes.

Europe ex EU

  • On 26 January, each of the ESAs published their opinions on the first draft of EUFRAG’s proposed sustainability reporting standards. The EBA, EIOPA, and ESMA support the standards, but each highlights specific areas for EUFRAG to provide further clarity or improvement. EUFRAG’s standards will be incorporated into the EU’s recently completed Corporate Sustainability Reporting Directive, which will require firms to produce public ESG reports in respect of 2024 and annually thereafter.
  • The ESAs’ call for evidence on greenwashing closed on 16 January and several industry groups have published their responses. The pan-EU asset management association, EFAMA, commented on the lack of a commonly agreed definition of greenwashing, particularly across sectors and jurisdictions. EFAMA also pointed to excessively broad definitions of greenwashing and proposed that regulators should look to a knowing misrepresentation of sustainability-related activities and an intention to mislead. EFAMA’s feedback on intentionality was mirrored in the response of their sell-side counterpart, AFME. The ESAs are due to publish a progress report in May 2023 and a final report in May 2024. The aim of their work is to inform policymaking and supervision related to greenwashing.


  • The Chair of the ISSB, Erkki Liikanen, spoke at a Davos panel, confirming that the ISSB’s final corporate ESG reporting standards will be published in June 2023. Liikanen also backed IOSCO’s call for companies to begin reporting aligned with the ISSB’s standards in 2024, noting a “tremendous urgency” to start soon. He also encouraged Asian countries to adopt the standard. Note that the ISSB standards will be incorporated into the Sustainability Disclosure Requirements and adoption will therefore be mandatory in the UK. Other jurisdictions might follow suit.
  • On 18 January, the Financial Stability Board (FSB) published a progress report on the implementation of reforms designed to regulate the risks posed by non-bank financial intermediation. The report takes stock of various developments, including elements of Basel III, IOSCO’s recommendations on money market funds, and the FSB’s ongoing work on the systemic risks posed by non-bank entities.