DP23/1: Finance for positive sustainable change

We asked for views on sustainability-related governance, incentives and competence in regulated firms.

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. To help the financial industry deliver against its potential to drive positive sustainable change, we published DP23/1 to encourage an industry-wide dialogue on firms’ sustainability-related governance, incentives, and competence.

This is a fast-moving and evolving field where there are many initiatives taking place. We wanted to help narrow this field and highlight good, evolving practices while considering whether there is a case for further regulatory measures in this area.

To encourage diversity of thought and wide-ranging debate, this Discussion Paper also included commissioned articles from experts with relevant and interesting perspectives on firms’ sustainability-related governance, incentives, competence and stewardship arrangements. We are grateful to the authors for their views and contributions.

Feedback we received

The responses we received were generally positive about the importance of sustainability matters and the role of the themes outlined in DP23/1.

Objectives, purpose, business and strategy

Respondents broadly agreed that integration and alignment are important factors in the successful delivery of firms' sustainability strategies. Many considered that to be effective, sustainability strategies would need to be built into day-to-day business strategies. This included risk management, product development and customer engagement.

Respondents noted it is important that firms clearly articulate the purpose underpinning their approaches, which should in turn be reflected in the tone from the top. But many respondents said that some of the DP’s themes, particularly around culture, are less suited to formal rules, which could risk being overly prescriptive and leading to tick-box approaches.

Role of board and senior management

Respondents noted the pivotal role that senior management and boards play in delivering and overseeing sustainability strategies.

There were, however, mixed views on the effectiveness of sustainability champions, with some arguing they improve engagement and innovation, while others said they risk creating ‘siloes’ and diluting accountability.

There was some consensus that working groups are only effective when adequately resourced and linked to key governance structures and decision-makers.

Accountability

Responses were mixed on accountability and whether there would be merit in setting new expectations on senior management responsibilities for a firm’s sustainability-related strategy.

Those that did not support setting new expectations noted that sustainability is not a stand-alone area, rather it is a set of considerations to be embedded across business areas.

Incentives and remuneration

Most respondents were in favour of linking remuneration and incentives to sustainability-related objectives, with most advocating a mixture of short and long-term measures. Few, however, felt rules would be a helpful way to achieve this.

Investor stewardship

Respondents generally supported the UK Stewardship Code 2020, while some noted that reporting still has room for improvement to be accessible and comparable.

Training and competence

Respondents generally felt that given the breadth of issues that fall under sustainability, there will likely be gaps in knowledge, with implications for training and competence. Those respondents also noted complexity and lack of comparable data as additional challenges. They thought that knowledge gaps risk leading to poor customer outcomes and damaging market integrity.

Respondents had typically not seen evidence of the misrepresentation of environmental, social and governance (ESG) credentials, although they acknowledged this as a risk.

Common themes

A common theme across the responses, particularly from firms we regulate, was the need for new regulations (such as the Consumer Duty and Sustainability Disclosure Requirements (SDR)) to bed in before determining whether any additional rules would be needed.

Some respondents cited the existing rules at the time as sufficient.

Some also mentioned the role of the International Sustainability Standards Board (ISSB) standards, and previously the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations, in establishing a global baseline for sustainability disclosures.

Our response

We welcome the level of engagement from respondents and the importance with which respondents generally regarded the themes and issues in DP23/1. The insights we gained from the responses and in our dialogue with stakeholders have been very important in building our understanding of the state of play, including challenges and opportunities.

Since we published DP23/1, we have introduced rules relating to some of the themes. For example:

The Consumer Duty[3] came into force on 31 July 2023.
We published our SDR and labelling rules[4] on 28 November 2023.
The Anti-Greenwashing Rule[5] came into effect on 31 May 2024.

It is encouraging that many respondents to DP23/1 acknowledged the importance of these measures.

We recognise the importance of allowing time for new measures to be implemented before introducing further rules in these areas. And for the DP’s themes not captured by these measures, we recognise that current practices are still developing. Indeed, for some, we continue to oversee forums that bring industry representatives together to enable market-led solutions and guidance, such as the Climate Financial Risk Forum (CFRF)[6] and the Adviser’s Sustainability Group (ASG)[7].

Next steps

We are not currently considering introducing new rules on the themes discussed in DP23/1. But the DP’s themes remain important to firms’ success in:

Embedding sustainability considerations.
Delivering value to consumers.
Supporting market integrity.

We will continue to monitor developments in the market to make sure it is functioning well.

In keeping with our regulatory objectives, we will continue to focus on areas where potential harm to consumers, market integrity or competition is greatest, and where we think regulatory action can make a positive difference.

We will continue to promote the themes discussed in DP23/1 through other initiatives, both domestically and internationally. We will continue to:

Carry out supervisory engagement.
Bring market participants together to develop market-led solutions.
Influence on the global stage.

Through these actions, we aim to help the sustainable finance market to grow responsibly and continue to promote the UK as a leading financial centre.

05/06/2026 : System update No content change

02/04/2025 : Information added Updated to reflect feedback.

First published: 10/02/2023 Last updated: 05/06/2026 See all updates

DP23/1: Finance for positive sustainable change

Feedback we received

Objectives, purpose, business and strategy

Role of board and senior management

Accountability

Incentives and remuneration

Investor stewardship

Training and competence

Common themes

Our response

Next steps

Related content

Request an alternative format

DP23/1: Finance for positive sustainable change

Feedback we received

Our response

Next steps

Request an alternative format

DP23/1: Finance for positive sustainable change