Jon Relleen, director of infrastructure and exchanges at the Financial Conduct Authority (FCA), has told treasurers how the three objectives of the FCA – protecting consumers and investors, enhancing market integrity and promoting competition and positive change – remain particularly relevant in the context of environmental, social and governance regulation.
“ESG is a massive strategic priority for the FCA. Our strategy is focused around two words – transparency and trust,” Relleen said, speaking at a recent ACT conference on ESG. “We understand that there are a lot of fluid new rules and obligations coming through that can be difficult for corporate treasurers, and we want to help make sure this is understandable.
“Transparency is key to making sure end users understand what is going on in the ESG space, and trust is key to making sure that all the [ESG] products have high standards consistently across the board.”
ESG is a massive strategic priority for the FCA
Relleen emphasised that there was a need for international consistency, so as well as thinking about what is best in the UK, the FCA is very active in a number of international groups to make sure that UK rules mesh with international ones.
Talking about corporate disclosures, he said UK listing regime requirements are consistent with the Task Force for Climate-related Financial Disclosure (TCFD). That will now evolve over the coming years to make sure it is in line with international developments – the ISSB’s work is now coming to fruition (with two elements published in June 2023), which will go through a consultation process in the UK following endorsement by the UK government.
A second area of disclosure is around climate transition plans and net-zero commitments. “This is an essential part of sustainability-labelled products,” Relleen said. “The government has set up a task force so that best-practice guidance on how to set out transition plans and give forward guidance can be put into UK listing rules.”
The FCA has recently published a policy statement on Sustainability Disclosure Requirements (SDR) and investment labels, introducing a package of measures to help consumers navigate the market for sustainable investment products.
The FCA is introducing:
Relleen urged corporate treasurers to make sure they participated in contributed to the regulator’s and government’s consultation processes around ESG issues.
Also speaking at the conference, a Slaughter & May partner warned that ESG reporting was not an issue that could be ignored and that corporates needed to invest time in this area. “You need to get ahead of it now, regulation is changing at an increasing pace, so it is not an opportunity to put your head in the sand and hope for the best,” he told the audience of corporate treasurers. “If you invest now and take time to get on top of these things, you will put yourself in a much better position in terms of the challenge risk and litigation risk.”
Philip Smith is editor of The Treasurer