RegulationFeb 9 2023

FCA: ‘We want to clamp down on greenwashing’

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FCA: ‘We want to clamp down on greenwashing’
Emily Shepperd, chief operating officer and executive director of authorisations at the Financial Conduct Authority (FCA Media Centre)

One area of non-financial risk that needs more work is in the field of environmental, social and governance (ESG), according to Emily Shepperd, chief operating officer and executive director of authorisations at the Financial Conduct Authority.

Speaking at the Armstrong Wolfe COO Summit 2023, Shepperd said these are responsibilities that arguably straddle both the non-financial risk and the financial risk areas.

She said Armstrong Wolfe’s survey of COOs on ESG found that many are divided about which bucket it should sit in and there is also debate about whether the G – or governance, should be separated from ESG responsibilities.

“You should be in no doubt that we are fully behind the government’s agenda to make the UK the first net zero aligned financial centre,” Shepperd said.

“And many of you are on that same journey. You know it is good for people, you know it is good for the planet, and frankly you know it is good for business. So how do we achieve that?”

The FCA’s financial lives survey found that nearly eight out of 10 consumers believed businesses should have a wider social responsibility than making short-term profit.

Yet nearly nine out of 10 adults surveyed by Boring Money do not feel confident in investing in current sustainable funds.

“Our role is to ensure the integrity of our markets,” she said. “Your role is to demonstrate integrity in your products, integrity in your people and integrity in your promises.

“We want to clamp down on greenwashing and consider how to incentivise best practice.”

In the coming days, the FCA plans to publish a paper on the role regulations can play in driving positive change. 

Diversity and inclusion is not just numbers game

Another one of the areas of non-financial risk is diversity and inclusion.

Shepperd said many firms are great at the tick box part of this: making sure that they have a diverse workforce, but many are not so great at the inclusive part. 

“D&I is not just a numbers’ game,” she said. “It is a qualitative as well as quantitative issue.

“It is not about counting or bar charts but about measuring more deeply and analysing.”

Giving an example, she said the FCA noticed that the men were skewed more at both ends of the bell curve when it came to performance while the women were huddled in the middle. 

“We are currently trying to dissect that and I suggest you to put your data through the diversity lens and see what you observe underneath,” she said.