The UK is developing a new sustainable finance standard

The British Standards Institution (BSI) has announced that it is developing a new standard with a set of requirements for the assessment, governance, labelling and communication of funds presented as having responsible and sustainable credentials. It aims to make sustainable and responsible investment products more accessible for institutional and retail investors by promoting more explicit and consistent disclosures, and clarity of definitions, categorization and labelling.

The rise of sustainable finance has been the most noteworthy development in global finance since the financial crisis of 2008. But the large flow of new financial products presented as having responsible or sustainable credentials was not matched by an uniformization of definitions and principles nor the adoption of global industry standards to ensure clarity, comparability, and consistency in the way these financial products are designed, delivered and appraised.

The new standard by the BSI is being developed in conjunction with the global financial industry and the British government through the Department for Business, Energy and Industrial Strategy (BEIS). The standard will go through several rounds of public consultation and be made available in early 2022.

Rodrigo Tavares, Granito Group’s founder and president, was selected by the UK government and BSI as the Technical Author, with responsibility for the drafting and development of the standard. 

David Fatscher, BSI’s Head of Sector (Environment, Social and Governance) has stated that, “as the UK national standards body, it is BSI’s role to identify gaps in the standards landscape and then convene those experts (from across government, business, academia, civil society) who can provide their own unique voice into how the necessary good practice is shaped. This process of building consensus underpins the standards model that BSI pioneers in the UK, and also operates in ISO, the international standards organisation.”

The new standard informs new work in ISO, that the UK is driving. “In that sense then, we are supporting the government’s ambition for the UK to be the global centre of excellence for sustainable finance – by being the home of impactful world-leading sustainable finance standards”, added Fatscher.

In alignment with the International Organization for Standardization (ISO), the standard will be the world’s first rule-based prescriptive standard, emanating from a National Standards Body or ISO, with provisions for responsible or sustainable investment funds.

Besides the new standard for investment funds, BSI has in past developed other Publicly Available Specification (PAS) on sustainable finance, specifically related to implementing principles and approaches to sustainable finance, and to the process of integrating ESG and sustainability considerations into investment management.