However, this database won't be fully operational and accessible until 2027, at the very earliest, so retail financial services will have to rely on sustainability data collected by third-party vendors to meet regulatory requirements.
FTA: Where do you foresee potential problems under the Financial Conduct Authority's labelling regime when it comes to data?
RA: The labelling scheme presented by the FCA is very promising, mainly because it is easy for users to understand and implement.
However, as with any new regulation, there's always room for improvement.
Currently, sustainability claims made by a fund are not necessarily backed by scientific classifications, which can make them appear somewhat vague.
This may discourage asset managers from using it, as they want to avoid making claims that could be perceived as greenwashing.
FTA: What improvements to sustainability data can we realistically expect in the near future?
RA: One of the main improvements has been the introduction of limited or reasonable assurance to sustainability data.
The competencies set out by auditors in this space have drastically improved over the past few years, and they have really ramped up in-house capabilities.
In Europe, we're expecting sustainability reports to have assurance of some sort, depending on the size and nature of the reporting company, which will drastically improve data credibility.
Recent European regulatory changes also appear to be influencing other regions. Large economies in Asia, for example, are now implementing similar requirements on non-financial companies to report on sustainability.
This will likely result in a much more comprehensive range of data being published worldwide.
Although accessing reliable ESG data may remain a challenge, these developments are certainly promising.
FTA: What would be the single most effective move to make the ESG retail investment space work better for investors?
RA: An easy-to-understand labelling scheme, like the one published by the FCA, combined with the scientifically robust framework of the EU taxonomy, would create the best of both worlds.
This approach would not only simplify navigation between products but also help to establish trust in the data.
It's essential for asset managers to recognise that investors are seeking more than just non-greenwashed products.
Greenwashing is only the starting point in the broader conversation surrounding ESG-focused investments.
Investors increasingly want to understand the tangible social and environmental impacts of their investments, alongside financial returns, so access to credible data is key to ensuring that investment labels are not misleading.
This is a critical opportunity for asset managers to set themselves apart – and in my view, one they should embrace.
FTA: Any tips for financial advisers on how they can navigate the ESG space?
