The Financial Conduct Authority said it is "mindful" of firms' desire for more clarity on sustainability regulations.
Emily Shepperd, the FCA's chief operating officer, said to secure London’s position as a green finance centre, regulation had to provide guardrails while avoiding "cumbersome regulatory divergence".
Speaking at the UK Sustainable Investment and Finance Association Leadership Summit on Wednesday (November 6), she said: “This needs to be coupled with flexibility as the sustainable finance market evolves, working closely with international colleagues and engaging with the market to ensure practical challenges are taken into account.”
Shepherd said the regulator’s new sustainability disclosure and labelling regime tries to take into account the realities for firms and the market. Giving the example of the improvers label to recognise funds which are on a credible path to net zero by 2050.
However, she added: "While a lot of progress has been made in regulation, firms want more clarity and we remain mindful that firms will need time to implement existing rules and requirements."
To help with this, Shepperd said the FCA is giving examples of good practice on its website and engaging with bodies representing investment firms.
“At its core, our policy programme is one that will build industry trust, reduce greenwashing, promote competition and strengthen wider market integrity,” said Shepperd. “And each development is a key example of how we intend to conduct policymaking going forward, supporting green finance to scale with integrity.
“We are encouraged to see companies set out their own plans for how they will shift to low carbon alternatives.
"This does, however, need to be supported by increased transition capital and sustainable investment products, which in turn could increase the size and liquidity of the UK market, creating opportunities for growth.
"This is where regulation comes into the picture, reflecting the varied needs of companies.”
Going forward, Shepperd said the regulator will consult on strengthening expectations for the transition plan disclosures of listed companies.
And Shepperd said it was important for firms to have corporate cultures which attract and retain the world's top talent. For this, looking at talent outside of London would work to "better reflect the demographic of consumers".
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
