Financing Sustainable Change: What Does Good Governance Look Like?

The following article was originally published on 10 May 2023 by the Harvard Law School Forum on Corporate Governance. The paper was written by Vanessa Havard-Williams, founding partner of the ESG team at Linklaters LLP, and Robert G. Eccles, a Visiting Professor of Management Practice at Oxford University Said Business School.

In February 2023 the UK Financial Conduct Authority (FCA) published “Discussion Paper DP23/1: Finance for positive sustainable change: governance, incentives and competence in regulated firms.” The purpose of the DP is “to encourage an industry‑wide dialogue on firms’ sustainability‑related governance, incentives, and competencies. In a field where there are many initiatives taking place, our aim is to help narrow this field and help with highlighting good, evolving practices if finance is to deliver on its potential to drive positive sustainable change.” The focus of the DP is “regulated firms” (i.e., financial institutions of various kinds) in the UK and comments are due by May 10, 2023.

It is our view that the ideas and recommendations made in this paper have broader applicability than simply UK-based financial institutions and their regulators. Addressing climate change and integrating sustainability more generally into corporate strategy is a challenge facing companies and financial institutions all over the world. Thus, it is useful to put this DP into a broader context by acknowledging a multitude of incipient sustainability reporting standards. It is also important to acknowledge the increasingly politicized nature of sustainability, especially in the U.S. Without the appropriate governance structures and processes, incentives, and the necessary competencies from the board down to middle management, it will be impossible for any organization to deal with the complex field of sustainability reporting standards while simultaneously being caught between opposing political forces.

To read the full article, visit Harvard Law School Forum on Corporate Governance.