The financial services industry is facing a period of substantial upheaval. Uncertain global economic and political conditions, and the fallout from the COVID-19 pandemic present significant challenges and when combined with the raft of new regulatory initiatives, ever-increasing pressure on costs and the rapid development of new technologies, are forcing financial institutions to take radical measures to survive, adapt and grow.

One area where there is a raft of new regulatory initiatives is sustainable finance, particularly environmental, social and governance (ESG) regulation. Political, social and investor pressure has led to the introduction of a swathe of new rules in many jurisdictions.

Key risks include:

  • UK – ESG matters are high on the regulatory agenda with a number of reforms being pushed forward.
  • US – The SEC has placed the marketplace on notice with respect to sustainability claims.
  • Europe – In Germany the BaFin has published guidance for domestic public investment funds.
  • Canada – OFSI has had ongoing engagement with financial institutions.
  • Hong Kong – The HKMA has adopted a three-phased approach to promote green and sustainable banking.
  • China – The People’s Bank of China, jointly with six other top Chinese regulators, are building up a green financial system.
  • Australia – Superannuation funds are making adjustments to their investment strategies with a view to achieving net zero commitments.
  • UAE – The Dubai Financial Services Authority is taking a more active role in enabling the development of sustainable finance in the Dubai International Financial Centre. Dubai has a Sustainable Finance Working Group which has published two ESG and sustainable finance guides.

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