New research reveals that while majority (72%) of business leaders in the financial services industry are confident they’re prepared for future ESG regulation, more than 80% feel they should be doing more. In fact, 3 out of 4 businesses (77%) are planning to make a permanent hire specifically to handle ESG.
This research, from London-based financial service innovation platform TISAtech and partner ESG providers The Disruption House, surveyed over 200 decision-makers for UK financial services firms, to understand their preparedness and attitudes towards ESG regulations. It revealed that 86% of businesses have performed an ESG assessment, but that lack of clarity over how to perform this assessment is the leading reason businesses have yet to do so.
The data presents a counterpoint to the view of ESG regulation as confusing, excessive, and performatively adopted. However, it still reveals areas for improvement. Social was the lowest priority of the three, with just 24% of respondents citing it as the highest priority- contrasting with Environment (42%) and Governance (34%).
And beyond these numbers, the research also illustrates the reasons why businesses are motivated to address ESG- or why they are yet to. Moral obligation was most frequently cited as the primary reason for adopting ESG (21%)- beyond regulatory (18%), financial (15%), or competitive necessity (13%).
Amongst those yet to assess ESG or implement a strategy, confusion over how to do so is the key limiting factor. This further suggests that far from needing to be forced into change, there is an appetite for a more sustainable financial services sector, if regulators can provide clarity on how to do so.
With the UK’s anticipated ‘SDR’ measures yet to be formulated, this research crucially shows that far from being paralysed by fragmented, confusing regulation, and engaging in ESG only as ‘greenwashing’, leaders across the financial services are ready for regulation, and may even be in favour of stronger regulations. The potential benefits of doing so are clear, with 76% of businesses affected by the EU’s ‘SFDR’ measures agreeing that it has meaningfully changed the way they do business, and internally consider ESG.
Gary Bond, CEO of TISAtech said, “The UK has long been at the cutting edge of financial services. However, this is a time of unprecedented technological and operational change, causing institutions across the sector to re-examine how and why they do what they do. I am heartened to see that the industry is overwhelmingly prepared for regulation, and indeed that there is scope to go beyond regulations and hire specialists.
“I hope regulators take notice of this appetite when drafting SDR, ensuring that the UK can not only retain its place as a global leader in financial services, but establish itself as a moral leader too.”
Rupert Bull, CEO of The Disruption House added, “Preparedness for ESG is no longer negotiable in financial services, and this is evidenced by our research. But businesses can still go further. If we look at the pace of change in sectors like retail, it’s clear that the financial services sector still has the potential to improve, and that regulation can and will go further. The rewards are great for the businesses who take the lead here.”