Memorandum by the All-Party Parliamentary
Group on Socially Responsible Investment
We are concerned the draft Bill lacks explicit
1. Sustainable development and the role of
the financial services regulator.
2. Consumer education on the social and environmental
impact of their investments.
3. Protection of the green and ethical consumer
in regulated activities.
1. SUSTAINABLE DEVELOPMENT
There is a growing awareness among some financial
services players that our economic future relies on our environmental
future, and that the financial sector has a key role to play.
The FSA as the new single regulator of the industry
should in our view be involved in a debate on what is best practice
in sustainable development, i.e., environmental protection, social
equity and economic development, and ensure that their activities
promote rather than inhibit sustainability.
The All Party Parliamentary Group on Socially
Responsible Investment believes sustainable development is an
essential element of maintaining market confidence through the
elimination of risk in financial services and the draft Bill should
make this explicit.
The APPG believes that maintaining confidence
in the financial system (clause 3(1) of the draft Bill) requires
an explicit requirement to ensure that the financial system promotes
and enables sustainable development.
We believe that the market confidence objective
as drafted in clause 3 of the draft Bill is insufficient to achieve
this aim and that a further sub-clause (3) should be added stating:
"3(3) In considering the factors affecting
market confidence, the Authority must have regard to the contribution
of the financial system to promoting and enabling sustainable
development and to the contribution of sustainable development
to the stability of the financial system."
2. CONSUMER EDUCATION
An increasing number of consumers have ethical
and social concerns. Green and ethical consumers form a major
group within the population. In 1996, MORI identified 41 per cent
of the adult British population as green consumers.
We believe the FSA's new remit for consumer
education should take on board these legitimate concerns and educate
people about the choices they can make about where their money
goes. The existing clause 4 of the draft Bill should be amended
to include a subclause reading:
"4(2)(c) promoting awareness
of the range and general nature of impacts of investment and finance
on individuals, society, and the environment."
3. PROTECTION OF
The increase in ethical consumers is also evidenced
by the growth in funds invested ethically which has outstripped
all unit and investment trusts in every year except one since
1989. In the past two years to January 1999, the total funds managed
by ethical unit and investment trusts has almost doubled from
£1.1 billion to £2.1 billion according to the Ethical
Investment Research Service (EIRIS).
The Financial Services and Markets Bill should
make explicit the protection of green and ethical consumers. We
believe that the protection of consumers objective as drafted
in Clause 5 is insufficient to address this aim and should be
amended to read:
"5(2)(d) the differing degrees to which
consumers wish their ethical, social and environmental concerns
to be taken into account in relation to different kinds of regulated
activities. Ethical, social and environmental concerns include
consideration of the range and nature of impacts of investment
and finance on individuals, society, and the environment."
We also hope the FSA will protect the consumer
by issuing guidance stating that regulated persons should ask
consumers whether they have any ethical, social or environmental
concerns which they wish to have taken into account in the financial
advice which they receive as part of the routine fact find. I
proposed such a move in the Financial Services (Ethical Considerations)
Bill I presented to Parliament on 18 November 1998.
9 March 1999