On 3 November 2021, the FCA published its strategy on ESG, which was timed to coincide with COP26 Finance Day. The strategy outlines how the regulator intends to deliver on the target ESG-related outcomes included in its Business Plan for 2021/22. The aim is to support the financial sector in driving positive change while also building trust in green financial markets and increasing transparency around sustainability matters. Alongside the ESG strategy, the FCA also published a discussion paper on implementing the government’s ambitions for Sustainability Disclosure Requirements and investment labelling.
The FCA’s work in this area is based on five core themes:
- Transparency – promoting transparency on climate change and broader sustainability along the value chain. This includes: enhancing climate-related financial disclosures, promoting consistency and comparability of global standards for sustainability reporting, and improving transparency of performance on diversity and inclusion.
- Trust – building trust and integrity in ESG-labelled instruments, products and the supporting ecosystem. This includes developing a policy approach to ESG governance, remuneration, incentives and training/certification in regulated firms.
- Tools – working with others to enhance industry capabilities and support firms’ management of climate-related and broader sustainability risks, opportunities and impacts. This includes launching in Q1 2022 the Digital Sandbox and Green Fintech Challenge.
- Transition – supporting the role of finance in delivering a market-led transition to a more sustainable economy. This includes promoting well-designed, well-governed, credible and effective net zero transition plans by listed companies and regulated firms. Stakeholder engagement on this is expected sometime in H1 2022. Also, a consultation paper on prudential ESG disclosures is anticipated in Q3/Q4 2022.
- Team – developing strategies, organisational structures, resources and tools to support the integration of ESG into FCA activities.
The FCA has set out the key milestones in its ESG work programme until the end of 2022 for future regulatory and market-led work, supporting positive ESG outcomes into the future. These are summarised below.
- December 2021 – TCFD Policy Statements: the FCA will publish final rules for TCFD-aligned disclosures.
- H1 2022 – Feedback Statement on ESG and Capital Markets: the FCA will publish its response to feedback received as part of its discussion on ESG and capital markets in CP21/18.
- H1 2022 – Net Zero Stakeholder Engagement: FCA will engage with stakeholders on promoting well-designed, well-governed, credible and effective transition plans.
- Spring 2022 – Feedback Statement on SDR Consultation Paper: the FCA plans to provide feedback on the SDR and the product labelling proposal in the November discussion paper.
- Summer 2022 – FCA TCFD Report: the FCA will publish its first TCFD-aligned report considering the FCA as an operating entity and a regulator.
Interim updates will be provided on the FCA’s work as part of the Business Plan and Annual Report in 2022. The FCA will produce a more detailed stock-take on progress in early 2023.