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.
“We all know the arguments for a proper D&I policy and one of the unsaid ones is that not only is it the right thing to do from an integrity perspective, but it is more often than not the right thing to do for your bottom line.”
Discussing her time prior to the FCA, Shepperd said when pregnant with her second child, her then boss asked 'How’s the illness?'
“Of course back then I laughed it off – through gritted teeth - but there is no way you would get away with it today,” she said.
“Even during my 12-week maternity leave - yes I said weeks, not months – I was dialling into work every week to make sure I was staying on top of things. I mean I took keeping in touch days to a whole new level.”
During her career, Shepperd said she was often told by men – 'You’re very good at what you do Emily but you need to have more… polish. You need to have more gravitas’.
“Very easy for a six-foot-two man to say when all he has to do is put on a dark suit, tie and white shirt,” she said. “A bit harder to achieve as a then younger, under five-foot woman.
“In fact, when women have been successful in reaching one of the top jobs in an organisation, it has often been as COO.”
However, she added: “Times have thankfully changed. But there is still more work to do. There is always more work to do.”
Consumer duty
Touching on the consumer duty, she said the FCA’s role can only become easier if it makes sure firms are on board – or at least clear – about what the regulations expect of them.
“One policy that firms have not hesitated in giving us feedback on is the upcoming consumer duty,” she said.
“Now is a good time to remind everyone that the deadline is just six months away.”
Shepperd said now is a good time to line up distributors and other third parties to make sure they understand the principles and practice of the duty.
“Change is hard, we get it. But the principles of the consumer duty should not be controversial.
“Indeed, we’ve seen many excellent examples of industry embracing these.”
She said the FCA is asking firms to put customers at the centre of the products and services they offer and demonstrate the decision-making process around that.
“We also ask that the information you provide to them is clear and relevant to your target market,” she said.
“And one element that we need to be mindful of is that getting this right upfront should mean fewer new regulations down the line. It should mean fewer customer complaints and it could mean more customer loyalty.”
She said the deadlines on this are here to stay but the City watchdog will monitor how it is implemented and its impact.
“When things don’t work, we change,” she added.
sonia.rach@ft.com
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