The U.K.'s financial regulator is looking for input on how to oversee financial firms' ESG approaches and promises, including compensation practices related to sustainability pledges.
"We need to start closing the say-do gap and move from well-meaning commitments to real action," to tackle greenwashing and boost confidence in ESG standards, Sacha Sadan, director of ESG for the Financial Conduct Authority, said in a discussion paper published Friday.
The FCA regulates banks, asset management firms, investment firms and financial institutions.
"We are committed to supporting the role of the financial sector in enabling an economy-wide transition to net zero, and to a sustainable future more broadly," Mr. Sadan said in the paper.
As part of that effort, the FCA will look at sustainability-related governance, incentives and competence of financial firms as their consideration of sustainability-related risks, opportunities and impacts "are also coming under closer scrutiny," he said. Firms' governance arrangements, incentives structures and capabilities "must keep pace and remain consistent," Mr. Sadan said.
Beyond climate risk, sustainable change includes wider environmental issues like biodiversity and nature, social and governance issues including diversity and inclusion, living wages, fair taxation and supply chains, he said.
FCA officials will take feedback until May 10 on the role the regulator can and should play and the suitability of its current regulatory framework for achieving sustainable goals.