The regulator said that the transition will require an entirely different approach to markets and investment products.
As a result, the FCA intends to adapt its regulatory framework to enable a market-based transition.
It also stressed the central role financial services and markets have to play in the transition to a low carbon economy.
As a result, the FCA is expecting more high-quality climate and sustainability-related disclosures.
This should support accurate market pricing and help consumers choose sustainable investments while driving fair value.
To achieve this goal, the FCA is looking to implement disclosure rules in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The regulator also proposes to bring new rules into force from 1 January 2022.
These rules would standardise climate-related disclosures for all FCA-regulated market participants.
The FCA also wants to promote trust and protect consumer from mis-leading marketing and disclosure around ESG products.
It expects regulated firms to have more governance arrangements for more complete and careful consideration of material ESG risks and opportunities.
The FCA also aims to promote integrity in the market for ESG-labelled securities.
This could be done with the support of effective service providers such as ESG data, assurance and verification services.
Therefore, the FCA has said that the struggle against greenwashing will remain a priority.
As such, the financial regulator will work with government and international partners to promote standardisation of wider ESG-related disclosures.
Furthermore, the FCA awaits active investor stewardship.
The regulator thinks that it could positively influence firms’ sustainability strategies.
Yet, it stated that it could take regulatory action if there is insufficient evidence of active stewardship by institutional investors to advance environmental and social goals.
It also stated its hopes to see innovation in sustainable finance, among others with the help of technology.
