Many asset managers do not adhere to the stricter UK code of best practice

LONDON, September 6 (Reuters) – BlackRock, Fidelity, Legal & General, M&G and abrdn are among 125 companies approved under the stricter UK code of best practice to end “greenwashing” by asset managers, although that 64 peers failed to get the grade, according to the Council’s Financial Report said on Monday.

Asset managers are under increased scrutiny from securities regulators around the world to prevent “green laundering” or exaggeration of their products’ green credentials to investors.

The FRC beefed up its ten-year-old stewardship code in 2020 to end “hot plate” statements about investment decision-making that it says don’t show much if investors get their money’s worth.

The code is enforced on a compliance or explanatory basis, which means companies must publicly say why they are not enforcing it.

The revised code states that asset managers should not only specify their actions in the selection of investments, such as meetings with companies, voting at annual meetings, but also provide evidence on the results of these actions, a radical change.

As Britain seeks to promote London as a global center for sustainable investment, the emphasis is on taking environmental, social and governance (ESG) factors into account when investing.

The volume of money invested in ESG products has increased considerably, causing regulators to fear “greenwashing”.

The 300 asset managers who were signatories to the old code had to reapply, and the FRC said it received 189 requests, with failure to provide adequate evidence on results being the main reason 64 companies failed to become signatories.

The 125 signatories manage a total of £ 20 trillion ($ 27.7 trillion) under management, while the total for the 189 applicants was £ 32 trillion.

Several top-notch names were not among the signatories, but it is not known whether they applied. Some who failed to get the grade are expected to reapply in October or April of next year.

“To remain signatories, organizations will need to continue improving their reporting as market practices and expectations evolve,” the FRC said.

Companies that have adhered to the code must indicate this on their website.

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Reporting by Huw Jones; Editing by Emelia Sithole-Matarise

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