UK Trade Organization Seeks to Define ESG

The Investment Association attempts to clear up three key issues in the space.

UK’s trade body for asset managers wants to take care of one of the top issues with environmental, social, and governance (ESG) investment practices: how to properly define it.

The Investment Association has opened an industry-wide consultation on the subject, which ends March 1. It aims to bring “greater clarity to help savers and investors navigate and better access this growing feature of the investment management industry.”

The move will cover three topics regarding responsible investments and sustainability practices:

  • The creation of a standard ESG definition. ESG has inherited many names over the years, such as impact investing and negative screening. This initiative would simplify those with an agreed-upon definition of ESG.
  • The development of a UK product label for retail investors and their advisers to easily find funds that have sustainability practices.
  • A review or “stock-take” on reporting structures US money managers use to make their ESG decisions and the results these investments have had on bigger sustainability indicators.

The organization’s “definitional framework” used interpretations from the US-based collaboration group the Global Sustainable Investment Alliance to present early definitions for the space.

Chris Cummings, the Investment Association’s chief executive, said the asset management industry is at a “critical juncture in embracing sustainability” as well as defining the investment practice.

“With sustainability and responsible investment becoming an increasing priority for today’s investors, this consultation is an important step forward in gathering the views of the industry with the ultimate aim of bringing greater clarity to savers,” he said.

The Investment Association’s 250 members collectively manage $10.1 trillion in assets. Members must contact the organization directly to make their suggestions to the consultation.

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