UK Financial Conduct Authority Publishes Environmental, Social and Governance Strategy

The U.K. Financial Conduct Authority has published an environmental, social and governance strategy to support the financial sector in the transition to a "net zero", more sustainable and more inclusive economy.

The FCA's strategy is built on five themes supported by key actions that the FCA anticipates taking in the near future. U.K. regulated firms should expect significant engagement by the FCA on these issues. The five themes are set out below with some of the key steps the FCA anticipates taking in the near future:
 

• Transparency: the FCA will publish policy statements by the end of 2021 in response to its two consultations launched in June 2021 on climate-related disclosures for listed companies and certain regulated firms. It will also consult on introducing ESG disclosure for firms subject to the U.K. Investment Firms Prudential Regime in 2022. The FCA plans to release further information on how it intends to monitor compliance with the new premium and proposed standard listing rules in its November 2021 Primary Market Bulletin.
• Trust: the FCA has released a discussion paper on sustainability disclosure requirements and investment labels, ahead of a planned consultation in Spring 2022. The aim of the DP and consultation is to improve the availability of consistent sustainability-related financial information and build trust in ESG markets.
• Tools: the FCA's Digital Sandbox will commence in January 2022, supporting 12 firms developing solutions to industry challenges in ESG data and disclosure. The FCA has also launched the Green FinTech Challenge which offers support to firms aiming to support the net zero transition in the regulated business sector.
• Transition: the FCA will engage with firms in the first half of 2022 on their plans for transition to a net zero economy, including the governance of such plans (e.g. board oversight, senior management responsibilities, incentive schemes etc.) and the content and disclosure of transition plans. The FCA also plans to review its own regulatory framework to ensure that it supports ESG objectives and intends to consult on prudential ESG disclosures under the U.K. Investment Firms Prudential Regime in the second half of 2022, moving to other regulated firms in due course.
• Team: the FCA will work on integrating ESG considerations into its own activities. It plans to publish its first TCFD-aligned disclosure report in summer 2022 and annually thereafter.

The FCA has also published a summary of these upcoming ESG milestones.

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