Financial Services and Markets Appendices to the Minutes of Evidence


APPENDIX 11

Memorandum by the All-Party Parliamentary Group on Socially Responsible Investment

  We are concerned the draft Bill lacks explicit reference to:

    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 AND THE ROLE OF THE FINANCIAL SERVICES REGULATOR

  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 ON THE SOCIAL AND ENVIRONMENTAL IMPACT OF THEIR INVESTMENTS

  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 GREEN AND ETHICAL CONSUMER IN REGULATED ACTIVITIES

  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


 
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