The regulators believe that the key to delivering this strategy is that the financial services sector needs to build trust through greater transparency. This is a recurring theme noted in the FCA’s business plan and UK consultations including the proposed audit and corporate governance reforms.
The speech coincided with FCA’s publication of DP21/4 Sustainable Disclosure Requirements and Investment Labels. The discussion paper is a precursor to further consultation due in 2022. FCA’s CEO indicated a dual approach to the proposed disclosures:
ESG challenges:
Greenwashing refers to misleading or unsubstantiated claims about environmental performance. Schroders’s Sustainability Institutional Investor Study 2021 indicates that 60% of ESG investors raised this as a challenge. Plans are afoot to incorporate international standards by taking into consideration the IOSCO recommendations. The IOSCO’s view is that standards will counteract the negative impact of greenwashing.
What does the UK wish to achieve?
FCA has indicated its target outcomes are:
The FCA suggests 5 building blocks to help them achieve their ESG strategy.
Timeframes:
The regulatory road map has been drafted. This includes the publication of various standards and consultations over the next 12 months and beyond. It begins by phasing in the disclosure rules during 2022.
Embedding ESG:
UK supervisors expect all regulated firms to meet these standards. Firms failing to meet the standards are to be held accountable.
It’s vital that boards determine and communicate their ESG policies to staff. Like TCF (Treating Customer Fairly), ESG policies need to be living documents that change along with the business. The ESG strategy needs to be embedded in the firms’ objectives and culture. To support this, firms require strong governance infrastructure:
How Ruleguard can help you:
Ruleguard is an industry-leading software platform designed to help regulated firms manage the burden of evidencing and monitoring compliance. It has a range of tools to help firms fulfil their obligations across the UK, Europe and APAC regions.
Ruleguard checklists allow firms to create sets of tasks within the application. https://www.ruleguard.com/tasks-checklists
Tasks can be organised into lists and scheduled with a sophisticated frequency management system. Whether tasks are relevant every day or run to weekly, monthly, or less frequent schedules, they can be configured within Ruleguard to operate exactly as you wish.
Tasks can be organised into tiers with configurable dependencies, letting you set up reviews and checkpoints at every level of the list. For example, four-eye checks can be made mandatory before tasks can be signed off.
Get in touch with the Ruleguard team to learn more on 020 3965 2166 or hello@ruleguard.com.
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Head of Client Regulation| Ruleguard