Financial service firms will vary in the way they implement sustainability related considerations into their business objectives and strategies but not all will be on board completely.
These were the findings of the feedback to the consultation of the Financial Conduct Authority’s (FCA) discussion paper – Finance for Positive Sustainable Change.
In this latest sustainability discussion paper, the UK regulator was seeking views on sustainability approaches, its role in providing guidance, stewardship as well as culture and governance, environment, social and governance (ESG) competence and remuneration.
The paper forms part of the regulator’s commitment made in its ESG strategy published in November 2021. Its aim is to support the financial sector in driving positive change, while also hoping to build trust in green financial markets and increase transparency around sustainability matters.
In their responses to the paper, Morningstar noted approaches to embedding sustainability may differ depending on the financial services firm, but that it would “encourage the FCA to work with other regulators around the world to develop multi-lateral rules”.
The data firm also said it would be “premature” to mandate transition plans and sustainability considerations in business strategies given the upcoming reforms resulting from the regulator’s Sustainability Disclosure Requirements and the International Sustainability Standards Board.
The UK Sustainable Investment and Finance Association (UKSIF) was in agreement with Morningstar.
It said: “A very prescribed set of expectations from the regulator from the onset on embedding sustainability-related issues into objectives may not be entirely appropriate for all regulated firms spanning multiple sectors and geographies.”
UKSIF also commented on the skills gaps highlighted in the FCA discussion paper.
It pointed to knowledge gaps on social issues, and biodiversity and natural capital, and referred to the benefits of training and exams, such as the CFA’s certificate in ESG investing.
It also suggested creating advisory bodies to boards to provide counsel and detailed input on a range of sustainability factors, but warned against a ‘one-size-fits-all’ approach.
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