Fund managers will have to find space in already tightly constrained disclosure documents for climate-reporting information under proposed guidelines released by the Financial Markets Authority (FMA) last week.
The draft FMA ‘information sheet’ says climate disclosures “are likely to be material information that may influence an investor’s decision making” and should be referenced in product disclosure statements (PDS).
“… 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.”
About 200 entities including banks, insurers, most NZX-listed companies and licensed fund managers (with at least $1 billion in assets under management) must file separate annual climate disclosures with the first tranche starting this year.
While some groups have filed inaugural statements – collated in a new Companies Office-run register – most of the likely more complex, per-product fund manager climate disclosures are due in by the end of this month.
The Financial Markets Conduct Act (FMC) limits fund PDS’ to “no longer than 12 pages, or 6000 words” with managers often shunting pro forma disclosures to ‘other material information’ (OMI).
“We consider that the FMC Act and FMC Regulations are adequately flexible to allow for this disclosure to be made in a clear, concise, and effective manner,” the consultation says.
Managers will be expected to update PDS’ to include an appropriate climate-reporting blurb (with link to full disclosure document) “within 12 months of the date of publication of the finalised information sheet, or when the PDS is next updated – whichever occurs first”.
The draft FMA document says funds managers should also “consider” including climate-reporting information in their ‘statements of investment policy and objectives’ (SIPO).
“In accordance with this current guidance, if a CRE’s climate-related investment policies are directly relevant to achieving the investment objectives and strategies of the MIS [managed investment scheme], we expect the SIPO to include either an explanation of these policies or a link to them,” the FMA says.
Furthermore, the regulator encourages managers to file climate documents as an OMI on Disclose as well as on the official climate-reporting register – although there is no legal requirement for such double-disclosures.
Submissions are due by August 30.