FCA has published a discussion paper looking at how it can best support the role of the financial sector in the transition to net zero and more broadly to a sustainable future. While the paper will be of interest to all regulated firms, it is particularly aimed at credit institutions, insurers, asset managers and investment firms. The paper looks at:
- how governance, incentives and competence are considered in the Taskforce on Climate-related Financial Disclosure’s recommendations and how expectations in this area are evolving;
- how firms’ sustainability-related objectives and strategies are supported by their governance and incentive arrangements;
- how asset managers and owners organise and govern their stewardship activities to influence positive change; and
- firms’ training and competence.
The paper also includes a set of papers FCA has commissioned, which it hopes will help firms reflect on how their approaches to governance, incentives and competence support positive change.
FCA is interested in how firms embed sustainability in their business, and things remuneration is a key tool. It hopes firms may adapt their approaches and policies without the need for rule changes. It poses 15 specific questions, including:
- whether it should be setting regulatory expectations on how firms’ culture and behaviours can support positive sustainable change;
- how firms can ensure they have the right skills and knowledge to understand the risks and opportunities;
- what MI firms use to monitor and oversee climate and sustainability related developments;
- whether FCA should consider setting new regulatory expectations or guidance as part of the SMCR or as expectations on the board;
- what firms should take into account when designing remuneration plans; and
- how the main knowledge gaps across the financial sector can best be addressed.
FCA seeks comments by 10 May 2023.