On 10 May 2023 AREF submitted its response to the FCA's discussion paper (DP23/1) 'Finance for positive sustainable change: governance, incentives and competence in regulated firms'. The response was based upon a model response drawn up by AREF and other real estate related associations (BPF, INREV and IPF) .
AREF's submission was overseen by the Public Policy Committee and ESG & Impact Investing Committee.
Background
FCA DP23/1 was published in February 2023. In the paper, the FCA examined how governance, incentives and competence are considered in the TCFD’s recommendations, and how expectations in these areas are evolving with the work of the International Sustainability Standards Board (ISSB), the TPT and GFANZ. They considered more deeply firms’ sustainability-related objectives and strategies, and how these are supported by their governance and incentive arrangements. They also reflected on how asset managers and asset owners organise and govern their stewardship activities to influence positive change. Finally, they considered firms’ training and competence on sustainability.
In the second part of the paper there was a collection of 10 commissioned articles from experts, including industry practitioners, academics and other thought leaders, with relevant and interesting perspectives on firms’ sustainability-related governance, incentives, competence and stewardship arrangements. By including the views of experts, the FCA aimed to encourage diversity of thought and wide-ranging debate in this evolving area, complementing their own ideas and analysis. The views expressed in these commissioned articles wer those of the authors and did not necessarily reflect the FCA's views.
The FCA requested feedback to the discussion paper by 10 May 2023. The feedback, as well as ongoing analysis and supervisory engagement with firms, will help the FCA to consider how they can better support the industry in this evolving field and whether there is a case for further regulatory measures in the area of firm governance, incentives and competencies to support the role of finance in contributing to positive change. Also, the FCA encouraged firms to reflect on the matters discussed, and consider, as appropriate, incorporating them as they review and refine their current approaches to governance, remuneration, incentives and training.
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