FCA Appoints First ESG Director, Reiterates Commitment to Sustainable Finance

The UK’s financial regulator this week appointed its first ever Director of ESG, tapping Legal & General Investment Management’s (LGIM) Sacha Sadan for the new role. Sadan, who served as Head of Investment Stewardship with LGIM for nearly a decade, will take up the new job this summer, according to the FCA.

Sadan will develop and advocate for the FCA’s approach to sustainable finance, both domestically and internationally, the regulator said.

‘The FCA is rightly seen as an international leader on the role financial regulation should play in delivering a more sustainable and greener future,’ Chief Executive of the FCA, Nikhil Rathi, said. ‘We welcome the recent addition to our remit of a requirement to have regard to the UK target of net zero carbon emissions.’

The UK regulator has already been busy at work developing a number of climate-related regulatory standards, including a comply or explain requirement for premium listed companies to make climate-related disclosures, which went live in December 2020.

While the FCA has stopped short of directly aligning itself with the EU SFDR and Taxonomy, the UK government is also mulling additional rules that would require companies to disclose climate risks by 2022. The disclosures, which are currently voluntary, would become mandatory for large, privately-held businesses and those with shares listed on public markets.

That means that financial firms may soon have to provide ESG information at the firm, fund and portfolio level, in a move that would see at least some overlap with the SFDR regime. Funds marketing into the EU, meanwhile, will still have to abide by the nascent SFDR rules.

In any case, the appointment of its first Director of ESG underlines just how seriously the FCA is taking ESG investment. Firms should prepare for some major changes down the line, even if they’re not directly affected by the EU SFDR and Taxonomy.