The Advisers’ Sustainability Group Publishes Report “Sustainability In Practice: Guidance For Advisers And Trainers”

The ASG has published its long-awaited report: “Sustainability in Practice: Guidance for Advisers and Trainers”, with the aim of providing practical guidance to help advisers develop their understanding and navigate the changing sustainable finance landscape.

Sustainable finance is an area of governmental focus, and there have been significant regulatory developments in recent years, including the introduction of the FCA’s Sustainability Disclosure Requirements (“SDR”) in 2024.

The Advisers’ Sustainability Group (“ASG”) is an industry-led group established by, but independent of, the FCA, with the Personal Investment Management and Financial Advice Association (“PIMFA”) acting as the secretariat. The ASG was created to support the advice sector in delivering advice on products and services that make sustainability claims, and to enable advisers to build their own capabilities in this area.

Although the report does not constitute formal regulatory guidance, the FCA will no doubt have an eye to it when developing further policy in this area.
In the report, the ASG provides four main recommendations for firms and advisers:

1. Ask every client about sustainability preferences and values

• The ASG has recommended that it becomes standard practice for every financial adviser to ask about, and identify, any sustainability, ethical, environmental, or social preferences that a client may have. Asking about sustainability preferences is increasingly market standard, but the ASG report provides further confirmation of this direction of travel.

2. Consider material sustainability risks

• The ASG has highlighted that advisers should be aware that some sustainability risks represent financial risks and could therefore affect all clients. The ASG recommends that firms integrate awareness of such risks into their advisory and investment processes. The guidance provides an overview of why sustainability issues matter in finance and explanation of the types of financial risk caused by sustainability risk.

3. Leverage SDR

• The ASG has recommended that all advisers familiarise themselves with SDR so that they are able to identify, understand, and explain sustainable investment products. The report provides a summary of how advisers can use SDR in practice and how the ASG believes that Consumer Duty can also be a helpful lens through which to consider a client’s sustainability preferences.

4. Address sustainability-related training requirements

• The ASG recommends that firms and advisers integrate CPD training on sustainable investments and relevant regulatory developments into their ongoing training programmes, to build knowledge and competency. It notes that this is the key to enabling advisers to approach sustainability conversations with confidence, and that such conversations can, in many cases, deepen client relationships. The report includes a recommended framework for adviser training and CPD provision.

The report’s three key sections will provide much-needed information and guidance for firms and advisers looking develop their knowledge and expertise in sustainability related strategies and options. Chapter 1 focuses on the essential knowledge advisers should have in relation to sustainable investments. Chapters 2 and 3 follow the advice journey, covering topics including setting up a sustainable finance proposition, integrating sustainability into the advice process, and building ongoing training programmes.

This much anticipated report is an important publication – an important guide for firms and advisers and perhaps the starting gun to the reigniting conversations with retail investors, and the public at large, about the need for, and routes into, sustainable investment options.