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2023 - The Year of Regulation

  • Publish Date: Posted 8 months ago

We’re all aware we are in the midst of a global climate crisis. This is even more evident as regulatory bodies and financial institutions are awakening to the importance of environmental, social, and governance (ESG) factors. This year alone, several new ESG legislations have come into force or are coming into force, making 2023 a significant year for the finance sector.

In the UK, companies with more than 250 employees will have to disclose their environmental impact, this include carbon emissions, energy use, and waste and water management, in an annual report from April 2023. It is hoped this initiative will reveal the businesses that prioritise their carbon footprint reduction and what steps they are taking towards sustainability. Additionally, starting from this month (June) 2023, UK companies listed on the London Stock Exchange will have to comply with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

In the EU, Sustainable Finance Disclosure Regulation (SFDR) came into force in March 2021. This regulation requires asset managers and financial advisers to disclose how they integrate ESG risks and opportunities into their investment decision-making processes. Furthermore, the EU's Taxonomy Regulation effective from July 2020, set strict criteria and guidance on identifying sustainable investments. This was then enhanced on 5 January 2023, when the Corporate Sustainability Reporting Directive (CSRD)EN. entered into force. This new directive modernises and strengthens the rules concerning the social and environmental information that companies have to report on an annual basis.

The United States also took a step towards ESG-related financial regulation with the establishment of the Climate Risk Disclosure Lab by the Securities and Exchange Commission (SEC). The SEC is now requiring companies to disclose their climate risks, which helps investors make more informed decisions when allocating their funds. This requirement has in part lead to the anti ESG political movement in the US.

All these steps towards ESG have a significant impact on the finance sector (and for business generally). For instance, the risk of climate change is becoming a widespread concern among investors. Multiple emerging risks globally like natural disasters from flooding or wildfires pose a threat to the economy and investing plans. Only recently have we seen air quality in New York has been drastically affected from wild fires in Canada, the potential knock on cost the New York economy of this are yet to be calculated. This is just one example that have led to investors, regulators, and corporations taking a more proactive approach in mitigating climate risks on their balance sheet.

Firms that do not comply with these regulations will face an array of penalties and might risk their reputation and effect their long term grown and ability to be competitive in the market place.

These new legislations will drive the business world towards more sustainable and responsible decision making, which can benefit all stakeholders in the long run. It will enable investors to make more informed choices, promote responsible decisions towards sustainable and ethical practices, and encourage the growth of the green economy, ultimately leading to a more sustainable future.

The legislation and regulations coming into effect this year showcases the finance industry's growing vigilance toward ESG factors and its commitment to tackle the global crisis. As the importance of sustainability and social impact continues to grow, and organisations take steps towards a better future. The race is on for green talent in the workplace in a previous article (https://www.allen-york.com/blog/2022/11/the-esg-talent-race) I spoke about how “the demand for experienced and skilled professionals within ESG has reached an all-time high, vastly exceeding the existing number of experienced and qualified professionals available in this booming discipline. With the climate change agenda now strongly rooted in future business and economic strategies, the race for talent within ESG and the wider sustainability community presents a growing concern and challenge to the development of climate and sustainability solutions.” Each region has its own ESG regulations to abide by some global organisation will need to comply to all of the fore mentioned regulations and as a sector must turn attention to more green skills and jobs in every corner of their business.

The demand is still very high for talent within Sustainability / ESG finance roles and the skills in short supply (particularly in Sustainability). If we have any chance of meeting green targets, organisations will need to embrace ways in which to become greener and more sustainable in their approach (and therefore create more green jobs). The demand for green skills is currently outpacing supply, and competition will continue to be fierce, on the race to 2030 through to 2050.

In a competitive market, with a limited talent pool, you might need help. Allen & York’s market knowledge and understanding - combined with our network built over 30 years in Environmental & Sustainability hiring - sets us apart from others in the Green Executive Search and Recruitment space.

If you’re looking to hire in ESG or Sustainability, and need some help and advice, don’t hesitate to email Spencer at scooney@allen-york.com or visit our website at: www.allen-york.com.