THE GOVERNMENT’S Green Finance Taskforce, which counts Abundance co-founder Bruce Davis as a member, has called for financial advisers and fund managers to play a greater role in ethical finance.
A new report, published on Wednesday, proposes that investment advisers should ask clients about their sustainability preferences, and investment funds should clearly state the environmental, social and governance impacts of the fund.
“Market surveys regularly report that social and environmental objectives are an important factor for a majority of retail investors and the EU Markets in Financial Instruments Directive (MiFID II) requires advisers to offer products that are suitable to meet their customers’ needs,” the report said.
“However, advisors rarely ask their clients about their investment preferences. Correcting this failure would connect individual citizens more closely with the sustainability agenda, as well as help stimulate the flow of capital towards green projects.”
It also recommends that the Financial Conduct Authority work with the industry to develop simple labelling schemes to help consumers understand the environmental and social impacts of their investments.
“In the UK, many retail investors are likely to invest money in products bought directly, without private financial advice,” the report said. “Such retail investors will have limited appetite to wade through pages of disclosure documents, much less the ability to analyse them.”
Davis, who co-founded peer-to-peer consumer lender Zopa as well as ethical alternative finance platform Abundance, welcomed the report’s recommendations and said they could help green finance to become a mainstream investment option.
“The Green Finance Taskforce report makes it clear that the industry can no longer hide behind narrow and short sighted definitions of fiduciary duty when it comes to reflecting member, investor and client wishes to avoid contributing to increased climate risk and positively support sustainable businesses,” he said. “Hopefully this is a big first step towards green finance being the norm rather than the alternative for our collective investments.”
Davis, who is also a director of the UK Crowdfunding Association, joins more than a dozen senior leaders from the financial sector for the government initiative. The Taskforce works with industry to accelerate the growth of green finance and help deliver the investment required to meet the UK’s carbon reduction targets.