Actions Not Words
Companies need strong guidance to help them achieve sustainability, says Sacha Sadan.
Throughout my career as an asset owner, fund manager and global stewardship director I’ve focused on the protection of consumer interests and responsible capitalism, with the promotion of sustainable finance always close to my heart.
It is precisely the reason why last year I joined the Financial Conduct Authority (FCA) in a newly created role in which I will help the organisation develop and advocate its approach to sustainable finance both domestically and internationally. In particular I am leading the new ESG Division in the development of policy that will help ensure the long-term safety and soundness of firms, the proper functioning of markets, and the protection of consumers.
In this context I cannot think of a more important question today than how we make business and management a force for good. But I would reframe the question slightly differently, asking how do we actually make business sustainable for the longer term?
Here, finance has a huge role to play. Ultimately, we cannot solve the huge issues the world faces without finance being right at the heart of it. Governments cannot do it all.
An issue right now is that too many corporates and financial products are making ESG claims which they simply cannot back up with everyday actions, and this is no good for anyone, whether they are investors or consumers.
So, one of the most important things we can do right now is to ensure that products do what they say. It must no longer be easy to make a profit by just saying to your consumers and stakeholders that you are doing something which is sustainable and then over promising. It has got to be genuine. Take net zero for example. Everyone talks about it, but what does it actually mean in practice?
There has indeed been something of a backlash against ESG in recent times due to some greenwashing. I am pleased to say that it is getting called out quite quickly now and I believe we are generally heading in a positive direction.
My job is to say that there are international rules coming on sustainability, so you need to get ready.
Doing what they say
Ensuring companies are doing exactly what they say is now also a key area of focus here at the FCA, and we are currently building and working internationally for a set of clearly defined and world-class sustainability metrics via the International Sustainability Standards Board (ISSB).
Corporates need a helping hand here, and we are working with regulators across the world in building the guardrails and the right metrics to help them on this journey. My job is essentially to say to companies that there are international rules coming on sustainability, so you need to get ready.
For instance, a good example of collaboration is how we are working closely with the Task Force on Climate-Related Financial Disclosures (TCFD) which has already developed a framework to help public companies and other organisations disclose climate-related risks.
Ultimately, we need to make sustainability tangible. Harmonizing international efforts will be extremely important and we all need to hold hands along the way. Incidentally, auditors will also have a crucial role to play in the future ensuring the right sustainability metrics are assessed, as will assurance as their role becomes more important and relevant to this debate.
Leading ESG and Sustainability
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Being on the right side
I genuinely believe that today most companies want to be on the right side of this debate and engage fully with it. After all, studies show time and again that the companies that are regularly voted best to work for by their employees go on to outperform stock markets and make strong returns.
And this agenda is even more critical given the multi-faceted pressures that businesses and consumers face in the years ahead. For instance, the cost-of-living crisis will be a defining moment, while at the same time the equality, diversity and inclusion agenda will become even more important.
Employees want these agendas to be addressed in their workplaces, and they want to be comfortable about speaking out if they see things heading in the wrong direction. In short, companies can simply no longer get away with telling their workers ‘fluff’ and expect to be believed. They need positive actions to deliver on their words.
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