Asset managers in the U.K. may be facing more rules dictating how to classify environmental, social and governance investments than their peers in the European Union, creating extra red tape for firms that do business in both jurisdictions.
The U.K.’s Financial Conduct Authority released a consultation paper on Wednesday outlining an initial approach for how asset managers should label ESG products.
It includes five categories, compared with three currently in the EU’s Sustainable Finance Disclosure Regulation. Notably, the U.K. wants a category for transition funds, to cover assets issued by companies that pollute now but say they won’t in the future.
If the proposal goes through, it will mean more paperwork for asset managers who are required to declare product classifications under the two different regimes.
The EU’s system has already caused major upheaval in the global asset management industry, as firms outside the region with European clients are forced to adhere.
This article was originally posted on bloomberg.com