The climate reporting challenges facing the financial services sector

In November, digital transformation companies, fund operators and other key stakeholders convened at the annual Fund Operator Summit to consider the major challenges facing the financial services sector in the coming years. 

One of the key themes of the discussions that took place emphasised how climate reporting is now more critical than ever. It comes as the Financial Conduct Authority (FCA) progress consultations on additional greenwashing (including restrictions on how terms such as ‘ESG’, ‘green’ and ‘sustainable’ can be used) and climate disclosure obligations, and as the wider regulatory landscape for UK-based financial organisations becomes increasingly complex. 

More recently, this included the FCA announcing the formation of a group to develop a an environmental, social and governance Code of Conduct for ESG data and ratings providers, laying the groundwork for the introduction of regulatory oversight over ESG data.

These changes have the potential to significantly improve transparency throughout the financial services sector. Fund operators working in this space will, however, require support – particularly over the immediate term – to develop the systems able to capture the essential data enabling them to stay compliant with the increasingly high standards for ESG disclosure.

This will be particularly important as the greening of the global financial system gathers momentum through initiatives like the independent, International Sustainability Standards Board (ISSB), established as part of the UK’s COP26 presidency, that is developing a global baseline for private sector climate reporting. The publication of final standards for this are expected early 2023.

Digital transformation companies must therefore look to increasingly adapt their strategic approaches with a view to providing these forms of tailored support to fund operators, and companies beyond the financial services sector, helping them to develop an agile approach to data collection. This is a trend that will undoubtedly accelerate as the move towards more robust ESG regulations and reporting continues to grow.