The Financial Conduct Authority (FCA) has released a new discussion paper requesting views from the financial services sector on sustainability-related governance, incentives and competence in regulated firms.
'Finance for positive sustainable change' - published on Friday (10 February) - brings to fruition former commitments made by the regulator to conduct stakeholder engagement in its ESG strategy published ahead of COP26 in 2021.
The paper seeks to "help the financial industry deliver against its potential to drive positive sustainable change", primarily by assessing the case for additional regulatory reforms.
Key topics discussed in the paper include the potential oversight of ESG integration across investment processes and whether firms are reflecting their stated environmental or social objectives into policy and strategies.
Notably, the FCA will also be seeking to hear feedback regarding the incentivisation of effective stewardship by asset managers and owners.
Response is sought from asset management and investment firms, banks, building societies and insurers ahead of the 10 May deadline this year.
The release of the discussion paper comes less than two months after chancellor Jeremy Hunt's letter of recommendation to the FCA in December of last year. The letter explicitly referenced the expected role the regulator should play in supporting the UK's green finance agenda.
The letter read: "The FCA should therefore have regard to supporting…the government's ambitions for the provision of sustainable finance and the supply of long-term investment to support UK economic growth, including the supply of finance for infrastructure projects."
Alongside its calls for feedback, the new 97-page document includes articles commissioned by the regulator from industry experts regarding sustainability-related governance and stewardship arrangements.
FCA director of ESG Sacha Sadan said:"To deliver the transition to net zero, we will need a transformation of unprecedented pace and scale. Supporting firms is key. We know that many firms in the market are already doing this, we want to work with industry to ensure firms are able to do this well and able to do it consistently.
"At the core of our work, we want to see where the market is moving and highlight better practices to help and guide the industry. What gets measured and incentivised gets done."
