Policy makers and regulators seem keen to adopt both a “carrot” and “stick” approach to channelling private finance sustainably.
Financial services regulators have been particularly vocal in the last 12 months, specifically about the impact on the financial services sector as the world experiences, and attempts to respond to, climate change.
Mark Carney, outgoing governor of the Bank of England, highlighted how pressing an issue climate change is for the sector in October 2019, stating that, “ … changes in climate policies, new technologies and growing physical risks will prompt reassessments of the values of virtually every financial asset. Firms that align their business models to the transition to a net zero world will be rewarded handsomely. Those that fail to adapt will cease to exist. The longer that meaningful adjustment is delayed, the greater the disruption will be”.
Policy makers and regulators seem keen to adopt both a “carrot” and “stick” approach to channelling private finance sustainably. The carrot approach is to create incentives and opportunities for firms to drive the transition to a greener economy, whereas the stick approach requires firms to identify, assess, and manage the physical and transition risks arising from climate change and incorporate those risks into their traditional risk management framework.
This briefing summarises the key international, European, and UK regulatory developments applicable to the financial services sector that have been recently implemented, considered, or proposed, and that will form the basis for the significant changes we expect to continue in 2020.
Read the full briefing here.