Environmental, Social and Governance | UK Regulatory Outlook March 2023

FCA targets potential ESG 'harms' caused by UK asset management firms

The Financial Conduct Authority (FCA) has published its first "Dear CEO" letter since the launch of its new "integrated regulatory structure", which has meant that asset management is now supervised by the UK financial regulator's Buy-Side Directorate. The letter outlines the harms to consumers and markets most likely to arise from "asset manager" business models. Environmental, social and governance (ESG) investing is one of five risks of harm on which it focuses.

It encourages CEOs to consider whether the risks identified are present in their firms and recommends strategies are adopted to address them. It also provides developments to the ESG requirements and guidelines for asset management companies and the expectations on the design, delivery and disclosure of ESG and sustainable investment funds. See our Insight for more.

ESG reporting in Europe: Corporate Sustainability Reporting Directive obligations

As noted in our January issue of the Regulatory Outlook, the corporate sustainability due diligence directive will require qualifying companies to have a duty to undertake due diligence to identify actual and potential adverse impacts of their activities on human rights and the environment. For further analysis on this, please see our recent Insight.