The Financial Conduct Authority has pledged to embed climate considerations into everything it does.
Speaking at COP26 yesterday (November 3), chief executive Nikhil Rathi discussed the FCA’s ESG strategy, which will include new rules for advisers to take into account sustainability issues when advising clients.
Rathi explained as part of the strategy, the regulator will expand its work to address two further themes.
He said: “First, consistent with the goal of Finance Day, our strategy announces a programme of work to support a market-led transition to a more sustainable economy.
“And, as the FCA adapts to the chancellor’s expectation that we 'have regard' to the government’s commitment to a net zero economy in our regulation, we are working to embed climate and wider ESG considerations as a golden thread through everything we do.”
To coordinate these goals, the FCA has established an ESG Division, led by its first ESG director.
He said: “We seconded three members of staff to Mark Carney’s private finance hub to prepare for this conference. They will bring back important experience and expertise to help us in the next phase of this journey.”
His speech was in line with the FCA’s discussion paper and ESG strategies published yesterday.
It also followed a roadmap published by chancellor Rishi Sunak earlier this week for the UK’s SDR to help investors understand whether the firms’ practices align with their own sustainability preferences.
Rathi explained that based on some estimates, there needs to be collective public-private investment of $100-150trn (£73 - £109trn) globally through 2050 to keep emissions in check and achieve the 1.5 degrees temperature goal.
To help mobilise this capital, he said it was “imperative” that in the coming years, as a global financial community, “we build a trusted market and internationally consistent frameworks and standards.
“So, with partners international and domestic, it is time to walk the walk and take the next step on the journey to transform our sector,” he said. “And with it, our economy and our future.”
The international frameworks would be:
- to support the seamless integration of climate and sustainability into business, risk and capital allocation decisions;
- to make sure that companies and financial services firms deliver credibly on transition plans aligned with their net zero commitments;
- to ensure that investors have access to products and services that genuinely meet their sustainability preferences.
Rathi added: “Our strategy aims to encourage positive market-led solutions where possible. We aim to build sound regulatory foundations and set appropriate guard-rails.
“An immediate focus is, of course, how best to support a market-led transition to a more sustainable economy. We support the government’s ambition – announced today – to work towards making the UK the world’s first net zero financial sector.”
sonia.rach@ft.com
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