ESG 5.3 Pre-contractual disclosures

A manager that is required to prepare a pre-contractual disclosure under ESG 5.1.1R must do so in a clear and accessible way and include that disclosure in either:

1. (1)

   the pre-contractual materials for the particular sustainability product; or

2. (2)

   where that product does not have pre-contractual materials, Part A of the public product-level sustainability report relating to that product, as set out under ESG 5.5.1R to ESG 5.5.4R.

1. (1)

   A manager must, where it uses a sustainability label in relation to a sustainability product, include in the pre-contractual disclosure for that product the information in ESG 5.3.3R and ESG 5.3.6R.

2. (2)

   A manager must, where it does not use a sustainability label in relation to a sustainability product, but uses one or more of the terms in ESG 4.3.2R(2) in accordance with ESG 4.3.2R(1), include in the pre-contractual disclosure for that product:

   1. (a)

      the information at ESG 5.3.3R(3)(a) and ESG 5.3.3R(6); and

   2. (b)

      the information set out under ESG 4.3.5R(3)(a) to (c).

For the purposes of ESG 5.3.2R, a manager must include the following information in the pre-contractual disclosure which relates to a sustainability product:

1. (1)

   the sustainability label that the manager is using in relation to the sustainability product;

2. (2)

   the sustainability product’s sustainability objective, as part of its investment objectives, including details as to:

   1. (a)

      any material effect (including expected effect), on the financial risk and return of the product as a result of the investment strategy the manager has adopted to pursue the product’s sustainability objective;

   2. (b)

      the link between the sustainability product’s sustainability objective and a positive environmental and/or social outcome; and

   3. (c)

      any material negative environmental and/or social outcomes that may arise when pursuing the product’s sustainability objective, as identified under ESG 4.2.9R(1);

3. (3)

   details of the manager’s investment policy and strategy – in particular:

   1. (a)

      how the manager determines the assets the product invests in, including the criteria it applies in determining the sustainability characteristics of those assets;

   2. (b)

      the standard which the manager relies upon under ESG 4.2.4R(2)(b) including:

      1. (i)

         the basis on which that standard is considered to be appropriate for the purposes of determining the assets the product invests in (in accordance with its sustainability objective); and

      2. (ii)

         the name of either the specific function within the manager’s business or the third party that carried out the assessment; and

   3. (c)

      the proportion of assets (which may be expressed as an approximate figure or range) that are invested in accordance with the sustainability product’s sustainability objective, as well as the types of assets that are not invested in accordance with that objective, and the reason(s) for that;

4. (4)

   where the sustainability product is an index-tracking product, how the index provider’s methodology for index-construction aligns with the product’s sustainability objective;

5. (5)

   details of the manager’s policies and procedures to monitor the performance of the sustainability product in achieving its sustainability objective;

6. (6)

   details of the KPIs that the manager will use under ESG 4.2.4R(3) (if using a sustainability label) and any metrics a retail client may reasonably find useful in understanding the manager’s investment policy and strategy for the product;

7. (7)

   details of the manager’s investor stewardship strategy and resources in relation to supporting the achievement of the product’s sustainability objective, including:

   1. (a)

      where relevant, whether the manager is a signatory of the UK Stewardship Code 2020, published by the Financial Reporting Council; and

   2. (b)

      how the manager will apply its strategy and resources in a manner consistent with achieving the sustainability product’s sustainability objective; and

8. (8)

   details of the actions the manager will take in accordance with the requirements of ESG 4.2.9R(6).

In addition to the information set out in ESG 5.3.3R, a manager must also include the following information in the pre-contractual disclosure for a sustainability product:

1. (1)

   where the manager uses the sustainability label ‘sustainability improvers’, it must include the following information:

   1. (a)

      the timescale identified in ESG 4.2.15R(1) and the short and medium-term targets identified in ESG 4.2.15R(2); and

   2. (b)

      a summary of the types of evidence the manager has relied upon to satisfy itself that the assets in which the product invests have the potential to meet the robust, evidence-based standard set out under ESG 4.2.4R(2)(b);

2. (2)

   where the manager uses the sustainability label ‘sustainability impact’, it must include the following information:

   1. (a)

      the manager’s theory of change, with clear examples that emphasise how the manager expects its investment activities and the product’s assets to contribute to achieving a positive environmental and/or social impact; and

   2. (b)

      a summary of the method used to measure and demonstrate that the manager’s investment activities and the sustainability product’s assets are achieving a positive environmental and/or social impact; and

3. (3)

   where the manager uses the sustainability label ‘sustainability mixed goals’, it must include the following information:

   1. (a)

      details as to the proportion of the sustainability product’s assets which are invested in accordance with each of the sustainability objectives referred to in ESG 4.2.18R; and

   2. (b)

      in relation to the proportion invested in accordance with

      1. (i)

         the requirements for using the sustainability label ‘sustainability improvers’ under ESG 4.2.15R, the information set out under ESG 5.3.6R(1); and

      2. (ii)

         the requirements for using the sustainability label ‘sustainability impact’ under ESG 4.2.17R, the information set out under ESG 5.3.6(2)R.

A manager must, in order to meet the requirements of ESG 5.3.3R and ESG 5.3.6R, set out the required information so that it is clearly identifiable in the pre-contractual materials relating to the particular sustainability product (unless that information is otherwise being included in Part A of the relevant public product-level sustainability report for that sustainability product in accordance with ESG 5.5.1R to ESG 5.5.4R).

A manager must ensure that the information at either ESG 5.3.2R(2)(b) or ESG 5.3.3R(1) (as applicable), together with the information at ESG 5.3.3R(2), is located in a prominent place in the pre-contractual disclosure for the sustainability product.