| UK & Europe | Articles
As the industry awaits the outcome of the sustainability disclosure consultation, the FCA has published a more contemplative paper looking at governance, incentives and competence. Although the document is intended to “encourage an industry-wide dialogue” and share initial ideas, we are already seeing the same concepts – and even the same language – in questions to firms seeking UK authorisation. The details of future sustainability regulation may not yet be mapped out, but the destination is certainly looking clearer.
The discussion paper: DP23/1: Finance for positive sustainable change, turns the focus away from specific disclosure rules to the role of financial services on the ‘journey to net zero’. DP 23/1 aims to ask questions to encourage an “industry wide dialogue on firms’ sustainability-related governance, incentives, and competencies”. While acknowledging the many initiatives underway in the ESG space, the FCA is aiming here to highlight good evolving practices to help the industry deliver on what it calls “its potential to drive positive sustainable change”.
The regulatory focus in the UK so far has been on disclosures around products and services aimed at the ESG market. This latest DP aligns with the broader ‘strategy for positive change’ published in 2021 and is also in response to the Chancellors latest letter to the FCA on the provision of sustainable finance.
The paper is split into two sections. The first examines how governance, remuneration, and competence and training can support positive change, along with how firms embed sustainability-related considerations into their wider objectives. The FCA are clearly interested in how, beyond disclosures, firms incorporate the sustainability aims and values into culture, business strategy, governance, and incentives.
The second part is an interesting selection of commissioned articles written by external experts. The aim of these articles is, again, to encourage debate by providing different perspectives. Alongside the analysis in the first part, the FCA clearly hopes this will help firms reflect on different approaches can support governance, incentives, and competence and training.
The FCA’s deadline for comments on the Discussion Paper is 10 May 2023 after which it has said it will consider feedback when deciding future regulatory approach.
In the meantime, the authors of the paper “encourage firms to reflect on the matters discussed, and consider, as appropriate, incorporating them as they review and refine their current approaches to governance, remuneration, incentives and training.”
We can help
We are working with clients across the financial services industry on a variety of ESG-related areas and can help you as you work through some of these concepts in parallel with current regulatory requirements.
In the meantime, we are always keen to hear industry views on FCA discussion and consultation papers and, where helpful, submit responses. Let us know what you think.
Get in touch
Send a message:
