In a rapidly evolving financial landscape, it is paramount for financial firms in the UK to prioritise Environmental, Social, and Governance (“ESG”) factors. More than a trend, the consideration of ESG issues represents a strategic and necessary investment in the future of the financial services industry.
The focus on ESG is being driven by consumer and investor demand. There has been a surge in eco-consciousness and a heightened sense of social responsibility amongst society, resulting in an increase of consumers directing capital towards firms that prioritise ESG. With market volatility and soaring inflation threatening to distract the regulator and the UK government, the focus on ESG remains at the forefront. Ignoring these growing sentiments will have adverse reputational, legal, and financial consequences for firms who fail to comply.
On the 20th of March, the FCA released a Dear CEO letter where the regulator stated “ESG matters are high on our regulatory agenda”. The FCA and the Bank of England have already implemented measures encouraging firms to consider climate-related financial risks. The Financial Services and Markets Bill 2022, now in its final stages, is set to provide further statutory backing for the regulator in enforcing its ESG strategy. The message is consistent: firms must act now to ensure they are ready to implement ESG requirements and can demonstrate an alignment with the green agenda, or risk being left behind.
Moreover, integrating ESG presents opportunities for innovation and profitability. Responsible investing is no longer synonymous with compromised returns. These sustainable investments can enhance portfolio performance while mitigating risks related to climate change, societal unrest, and poor governance. Organisations that competently address these socio-environmental aspects are well-positioned to unlock avenues for sustained value creation. Empirically, effectively executed ESG strategies can bolster revenue growth, mitigate costs, curtail regulatory and legal interventions, enhance workforce productivity, and optimise investment and capital expenditures (McKinsey 2019).
ESG principles embody a forward-thinking perspective that ensures long-term business sustainability. Companies that exhibit strong ESG practices tend to attract and retain top talent, enjoy consumer loyalty, and build a positive brand reputation.
In conclusion, prioritising ESG isn’t just good ethics or yet another regulatory obligation, it’s good business. It is crucial that UK financial firms incorporate ESG strategies into their business models to meet evolving consumer preferences, comply with regulatory requirements, harness the potential for profitability and innovation, and secure their long-term viability in an increasingly responsible global economy.
How Complyport Can Help
At Complyport’s specialist team is supporting many firms with implementing ESG requirements by providing:
- ESG Policy
- ESG Checklist
- ESG Reviews
Contact us if your firm requires support with:
- Developing a compliance framework review to assess the impact of ESG requirements across the business
- Formulating roadmaps to implement this timely and efficiently
- Assessing the effectiveness and completeness of a roadmap
- Testing and reviewing
- Policy and procedure updates
- Training
Please contact Jan Hagen for any questions and assistance regarding ESG implementation plans via email at jan.hagen@complyport.co.uk to book in a free consultation.
