Environmental, social and governance (ESG) matters will become ever more important in the financial sector once the EU Disclosure Regulations (Regulation 2019/2088) begin to apply in 2021.
The Regulations apply to “financial market participants” which include investment firms which provide portfolio management and also AIFMs. Certain requirements will also apply to Financial Adviser Firms.
They require two key things:
the integration of sustainability risks in investment decision-making processes
the disclosure of ESG matters.
The Regulations apply directly to all EU countries from 10 March 2021 onwards, having come into force in December 2019. As the implementation date is post-Brexit it is yet not clear how these will apply to FCA authorised firms. At this stage FCA has not indicated what requirements it intends to put in place in this area.