The introductory podcast in The Devil is in the policy detail series, published here today, sets the scene for the project. Mick McAteer and Professor Robin Jarvis from FIC are interviewed by well-known financial journalist John Lappin.
There is a lot going on in this field. The big set piece COP26 event took place in November last year. It’s fair to say that it got a mixed reception. The ambition expressed by world leaders was welcomed by civil society. But, serious concerns were raised that the policy action does not match that ambition.
Each of the major financial market regulators – BoE, PRA, FCA, FRC, and TPR – has a role to play in reforming the financial system. There is a huge amount of work at EU and international level, too. It is not possible to describe all the various initiatives underway. But, some worth highlighting at UK national level include:
- The BoE published its second climate change adaptation report(CAR) in October 2021. This set out the progress financial firms have made on managing climate-related risks, and the BoE’s supervisory strategy for 2022. The BoE will publish a follow-up report focusing on the use of capital including on the role of any future climate scenario exercises. The BoE is also undertaking the Climate Biennial Exploratory Scenario (CBES) which examines the resilience of the UK financial system to the physical and transition risks associated with climate change. The results will be published in May 2022.
- The Financial Conduct Authority has developed a comprehensive strategy on climate change A strategy for positive change: our ESG priorities | FCA. Recently, it issued a Discussion Paper DP21/4: Sustainability Disclosure Requirements and investment labels | FCA with initial proposals on how investment firms should disclose compliance with climate goals and an investment label to help retail investors make informed choices. FIC’s submission to DP21/4 can be found here: Consultation responses | The Financial Inclusion Centre.
- The FCA is also working with the FRC on creating a new regulatory framework for investor stewardship. The FRC itself is undertaking a range of initiatives to improve the way companies report on climate impact FRC work on ESG and Climate related reporting.
- The Department for Work and Pensions (DWP) and the TPR have introduced new statutory guidance for pension schemes on governance and reporting of climate-related risks and opportunities Climate change governance guidance | The Pensions Regulator.
As well as getting the regulation and rules right, integrating and coordinating the activities of the regulators will be a major challenge. There are also questions about how these regulations will fit with international rules and initiatives and indeed the already established EU framework. Brexit may have happened. But, what happens in the EU still matter very much to the UK financial sector.
Finally, the government and Treasury, in particular, are seeking to establish a new post Brexit regulatory framework that maintains and builds UK competitiveness. Becoming a green finance hub is one part of this strategy.
So, as you can tell, there is a huge amount to talk about. This first podcast will seek to give a broad overview of the sheer scale of regulatory reform underway. Later podcasts will drill down into specific issues such as the role of the PRA and FCA, and corporate reporting.
We hope the podcasts are informative and interesting. If you have any questions or would like further information on the project, please contact Mick McAteer on email@example.com or firstname.lastname@example.org