UK Hedge Funds Expect ESG Cash Swell as New Rulebook Is Written

(Bloomberg) -- Hedge funds based in the UK may soon be handed a competitive edge over their peers in the EU, when it comes to ESG investing.

Britain, unlike the EU, has signaled it’s willing to enshrine the role that short-selling plays in environmental, social and governance investing in the foundations of its ESG rulebook. The Financial Conduct Authority has “explicitly sought feedback on the role of derivatives, short-selling and securities lending in sustainable investing” because “we need to ensure that our regulatory framework is appropriately designed to accommodate the breadth of ESG strategies observed in the market,” the UK regulator told Bloomberg in an email.

The FCA’s consultation period ended in January and the watchdog is expected to publish its policy proposals in the middle of this year. The Alternative Investment Management Association, which has publicly bemoaned the lack of focus on shorting in the EU’s ESG regulations, described the FCA’s signals as “really helpful.”