Part 2 of our conversation with Lorraine Mouat and Nick Hunt from Thistle Initiatives, who are at the forefront of understanding and navigating the latest developments in ESG in the financial sector. 

Thistle Initiatives is a regulatory compliance consultancy that helps businesses navigate the complex regulatory landscape by offering tailored solutions for businesses of all sizes. They guide companies through the process of bringing innovative ideas to market while ensuring compliance with the UK's Financial Conduct Authority (FCA) regulations. Nick and Lorraine have almost 40 years of experience between them, bringing the expertise needed to work in multiple industries to navigate the thorns of compliance.

In this episode expect to learn:

• FCA’s focus on retail consumers and vulnerable customers

The FCA places particular emphasis on retail consumers and vulnerable customers, ensuring that they have access to appropriate financial services and products. By prioritising financial awareness and protecting vulnerable customers, the FCA promotes a more inclusive and responsible financial services industry.

The FCA prioritises consumer protection and ethical conduct in the financial services industry. Drawing on lessons from the 2007-2008 financial crisis, the FCA aims to prevent consumer harm and promote accountability, underscoring the importance of transparency and ethical business practices.

The introduction of the Consumer Duty in July reinforces the FCA's commitment to protecting retail customers. This new regulatory obligation aims to ensure that financial services providers prioritise their customers' best interests and take necessary steps to prevent consumer harm.

Corporate users of financial services face different regulatory expectations compared to retail consumers. The FCA has implemented protections for small businesses and financial services users, ensuring that their interests are safeguarded and that they have access to appropriate services.

• FCA’s concerns about payment services firms

The FCA has expressed concerns about payment services firms, leading to increased scrutiny on previously authorised companies. As regulatory expectations rise, firms may face challenges in meeting these heightened standards, highlighting the need for robust compliance strategies and risk management practices.

Fintech companies must address the growing gap between banks and the regulator's expectations. Failure to do so could have potential consequences on consumer choice and market diversity, as firms struggle to maintain compliance while providing innovative and competitive services.

Another challenge in the ESG space is defining and measuring compliance. Clear specifications for ESG compliance are still in development, and the FCA is actively working on creating criteria for ESG labelling to help businesses and investors better understand and assess ESG performance.

To address regulatory challenges, Fintech companies can explore various solutions, such as absorbing regulatory capacity or leveraging banking-as-a-service (Baas) platforms. These approaches can help businesses navigate compliance challenges more effectively and maintain a competitive edge in the market.

• Approaching ESG compliance in Fintech

To approach ESG compliance in Fintech, companies should start small and set realistic goals. Developing company-specific policies and measuring progress is essential, as is leveraging data to demonstrate compliance and track improvements.

Embracing ESG initiatives can significantly enhance a company's brand value, attracting customers, investors, and talent. Additionally, ESG efforts can boost staff motivation by fostering a sense of purpose and pride in the organisation, ultimately contributing to overall business growth.

• The Elephant Carpaccio approach to compliance

The Elephant Carpaccio approach to compliance involves breaking down complex compliance challenges into smaller, more manageable tasks. By addressing each task individually, companies can make steady progress towards achieving their ESG and compliance goals, ensuring they don't become overwhelmed by the magnitude of the challenge.