On 10 February 2023, the FCA published Discussion Paper 23/1 ‘Finance for positive sustainable change: governance, incentives and competence in regulated firms’ (DP23/1). DP23/1 will be of interest to all regulated firms across the financial services sector. The aim of DP23/1 is to encourage an industry-wide dialogue on firms’ sustainability-related governance, incentives and competences.
In the first part of DP23/1 the FCA:
- Examines how governance, incentives and competence are considered in the Taskforce on Climate-related Financial Disclosures’ recommendations, and how expectations in these areas are evolving with the work of the International Sustainability Standards Board, the UK’s Transition Plan Taskforce and the Glasgow Financial Alliance for Net Zero.
- Considers more deeply firms’ sustainability-related objectives and strategies, and how these are supported by their governance and incentive arrangements. In addition, the FCA reflects on how asset managers and asset owners organise and govern their stewardship activities to influence positive change.
- Considers firms’ training and competence.
In the second part of DP23/1 the FCA includes commissioned articles. These articles, together with the FCA’s analysis, may help firms reflect on how their approaches to governance, incentives and competence support positive change. This may encourage firms to review their practices, even without the FCA setting further regulatory expectations
The deadline for responses to DP23/1 is 10 May 2023.
The FCA will use the feedback in considering what the industry would find most helpful in this evolving area. The feedback will also help the FCA consider in what direction it should take its future regulatory approach. The FCA will also consider firms’ arrangements in many of these areas as part of its supervisory engagement with firms.