UK authority embraces supervision as ESG frameworks mature

The UK Financial Conduct Authority (FCA) is entering a new phase of its ESG work, moving from introducing new rules to a supervisory approach aimed at embedding existing frameworks.

Speaking at the Investment Association’s Sustainability and Responsible Investment Conference in London yesterday, FCA head of department for sustainable finance Alicia Kedzierski said the regulator is focused on improving investor outcomes, signalling a shift beyond ESG rulemaking towards real-world impact as the market and regulatory landscape mature.

“As the market matures, we are looking at how [sustainability disclosure requirements] are working in practice to ensure investors receive accurate, decision-useful information,” she said.

Earlier this year, the FCA published a consultation paper proposing updates to its sustainability reporting requirements, replacing the existing Task Force on Climate-related Financial Disclosures (TCFD) aligned regime with one based on the government’s draft UK Sustainability Reporting Standards (UK SRS).

Kedzierski said the changes follow feedback that existing reporting obligations could be made “more proportionate” and better aligned with investor needs.

She added that the FCA’s role is no longer primarily about developing new standards, but ensuring effective implementation.

“The question is no longer whether new global standards emerge, but how effectively we embed them,” she said.

The FCA’s sustainability disclosure framework has evolved significantly, including the introduction of the Sustainability Disclosure Requirements (SDR) regime, while the TCFD was disbanded and largely superseded by the International Sustainability Standards Board’s IFRS S1 and S2 standards.

On the shift towards supervision and engagement with firms rather than additional rulemaking or enforcement, Kedzierski said: “Getting rules in place has only ever been one part of the puzzle […] We need to use the full breadth of our regulatory toolkit.”

She added: “When regulation works well, it doesn’t necessarily get to enforcement […] We can deal with many issues through supervision.”

Speaking on the FCA’s broader growth strategy, she said it was focused on maintaining the UK’s position as a competitive global financial centre that attracts investment, encourages innovation, and supports the transition to a more sustainable economy.

“To do this well, we need clear, proportionate and globally aligned rules; effective supervision to ensure standards are met in practice; market tools such as ESG ratings that are transparent, high quality and trusted; and, crucially, continued collaboration with industry,” she said.

The FCA’s consultation on planned rules for ESG ratings closes on 31 March 2026.