The Boutique Investment Group (BIG) has called for restraint on proposed extra climate-reporting duties tabled by the regulator earlier this year.
Under the guidelines published by the Financial Markets Authority (FMA) in July, fund managers (and some other entities) subject to climate-disclosure obligations would be required to reference those reports in other compliance documents.
In particular, the FMA draft ‘information sheet’ suggests fund managers would need to find room for climate-report explanations in the space-constrained product disclosure statements (PDS).
According to the regulatory proposal, the fund climate reports – published for the first time this year – “are likely to be material information that may influence an investor’s decision making”.
“… we are of the view that CREs [climate-reporting entities] that currently use a continuous issue PDS for a regulated offer need to consider whether their PDS and/or register entry should be updated,” the FMA consultation says.
“They should take into account what would be useful for investors, the CRE’s particular circumstances and PDS space restrictions. Similarly, CREs that make new regulated offers need to consider what disclosures are appropriate.”
But BIG, which represents the interests of compliance experts from about 20 fund managers, argues in its submission that the “mere existence” of the climate-discloure rules does not guarantee such reports are necessarily ‘material information’.
“… the logical implication is that we would also need to equally disclose information about every other piece of legislation that imposes obligations on us that impacts on our overall offering…,” the submission says. “…This would be an unhelpful outcome.”
BIG also notes that the enabling legislation only requires entities to refer to climate-disclosures in their own annual reports.
“… it would be hard for the FMA to take a position that industry is legally required to do something that is different to Parliament’s decisions,” the submission says.
Overall, BIG says the climate-reporting regime remains a work-in-progress, initial fund disclosures tend to complex, unwieldy (and possibly flawed) while the current public register for the documents is clunky.
“Against a backdrop of uncertainty, each fund manager could have entirely legitimate reasons for why it should not be over emphasising its climate reports at this point in time,” the submission says.
BIG is chaired by Simon Haines, general counsel for Nikko Asset Management (to be renamed Amova next year).