Background
In February 2023, the United Kingdom Financial Conduct Authority (“FCA”) published a discussion paper (DP23/1) to encourage an industry-wide dialogue on firms’ sustainability-related governance, incentives, and competence (the “Discussion Paper”).
On 2 April 2025, the FCA published a summary of the feedback received on the Discussion Paper, as well as its own responses and planned next steps. The FCA is not currently considering introducing new rules on the themes in the Discussion Paper.
Industry Feedback
The responses received by the FCA were generally positive about the importance of sustainability matters and the role of the themes outlined in the Discussion Paper. The feedback covered several areas, including:
- Objectives, purpose, business model, and strategy;
- Board and senior management roles;
- Accountability structures;
- Incentives and remuneration practices;
- Investor stewardship; and
- Training and competency development.
The FCA noted that a common theme across the responses was the need for new regulations (such as the Consumer Duty and Sustainability Disclosure Requirements (“SDR”)) to “bed in” before determining whether any additional rules would be needed.
In addition, some respondents cited the existing rules at the time as sufficient and some also mentioned the role of the International Sustainability Standards Board (“ISSB”) standards, and previously the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations, in establishing a global baseline for sustainability disclosures.
FCA’s Response
The FCA welcomed the level of engagement from respondents and the importance with which they generally regarded the themes and issues in the Discussion Paper. The FCA also noted that the insights gained from the feedback have been important to assist their understanding of the current market.
The FCA drew attention to the recent introduction of rules relating to some of the themes, which many respondents recognised the importance of – in particular:
The FCA also recognised the importance of allowing time for new measures to be implemented before introducing further rules in these areas. For themes in the Discussion Paper not captured by the measures above, the FCA will continue to work with the industry to enable market-led solutions and guidance – for example, through the Climate Financial Risk Forum (CFRF) and the Adviser’s Sustainability Group (ASG).
Next Steps
Although the FCA is not currently considering introducing new rules on sustainability-related governance, incentives, and competence, it will continue to monitor market developments and promote these themes to help the sustainable finance market grow responsibly, as well as to continue to promote the UK as a leading financial centre.
For further information, please reach out to ukreg@proskauer.com.