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In its recent ‘Dear CEO’ letter, the FCA clarified its commitment to supporting the financial sector in driving positive change through its ESG strategy and corporate agenda.

The term ESG refers to Environmental, Social, and Governance considerations and the risks and opportunities these may present and how they will impact a firm’s long-term strategic direction. This includes consideration of climate change, diversity, and other societal impacts, such as inclusion.

As the world continues to face unprecedented environmental challenges, an increasing number of consumers are recognising the importance of sustainability and are becoming more conscious of their environmental impact.

Key stakeholders, such as investors are therefore more likely to expect payment services firms to evidence ESG compliance. The expectation is that driving ESG factors is more likely to drive positive change and achieve long-term financial success, thus generating positive branding.

Payment services firms, therefore, need to think about how they can empower their customers for a greener future and increased sustainability. There are a number of initiatives that such firms could implement to evidence how they positively interact with the ESG agenda.

Collaboration: payment services firms can choose to interact with partners that offer ‘greener’ products or services, and which are committed to understanding the environmental impact associated with the services or products being provided.

Loyalty & Reward: Offering customers loyalty or reward points that highlight customer usage and carbon footprint, allowing this to be offset by way of points or by giving something back to society.

Social inclusion: Addressing the ‘S’ in ESG, social inclusion programmes can reach those communities that are less connected or otherwise underserved, and educate staff on the social impact of the products and services being offered by the firm.

Accountability: Focusing on the ‘G’ in ESG, and ensuring that the firm’s policies and procedures, reward, and performance management programmes incentivise everyone in the business to be accountable for ESG within the firm. Promoting diversity and inclusion and addressing any non-compliance through the firm’s hiring practices, promotion and advancement opportunities, and workplace conduct.

There is a lot for payment services firms to do, and a full programme of implementation and integration will need to be created, including determining the approach, identifying key stakeholders, creating success measures, and tracking performance so that the firm can evidence its level of ESG and payment services compliance to the FCA.

In conclusion, by weaving together the threads of ESG principles with their payment services compliance, firms can create a tapestry of sustainability, responsibility, and innovation that not only benefits the environment and society but also enhances the bottom line.

How can we help you?

Are you looking for help with your ESG principles or payment services compliance, or more general regulatory questions? Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.

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