FCA ESG strategy and priorities
11 November 2021
The FCA also set out its strategy and priorities for ESG. Its work in this area is based around five core themes:
- Transparency – promoting transparency on climate change and wider sustainability along the value chain.
- Trust – building trust and integrity in ESG-labelled instruments, products and the supporting ecosystem.
- Tools – working with others to enhance industry capabilities and support firms’ management of climate-related and wider sustainability risks, opportunities and impacts.
- Transition – supporting the role of finance in delivering a market-led transition to a more sustainable economy.
- Team – developing strategies, organisational structures, resources and tools to support the integration of ESG into FCA activities.
It also sets out clearly what it considers as ESG (compared to sustainability, for example). It says that ESG captures the key dimensions of wider sustainability; that is, how people, planet, prosperity and purpose come together to help enable 'the needs of the present [to be met] without compromising the ability of future generations to meet their own needs'.
The FCA has also disclosed its publication timeline for ESG over the next nine months, which can be summarised as follows:
- 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 product labelling proposal sets out 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.
The target outcomes set by the regulator include some of the measures described in this round up as well as others:
- High-quality climate- and wider sustainability-related disclosures to support accurate market pricing, helping consumers choose sustainable investments and drive fair value;
- Trust and consumer protection from mis-leading marketing and disclosure around ESG-related products;
- That regulated firms have appropriate governance arrangements for more complete and careful consideration of material ESG risks and opportunities;
- Active investor stewardship that positively influences companies’ sustainability strategies, supporting a market-led transition to a more sustainable future
- Integrity in the market for ESG-labelled securities, supported by the growth of effective service providers – including providers of ESG data, ratings, assurance and verification services; and
- Innovation in sustainable finance, making use of technology to bring about change and overcome industry-wide challenges.
The FCA has made considerable headway in respect of some of these outcomes but has some way to go on others. Clearly, this will be a focus for some time to come.
