On 6 October 2024, the Financial Conduct Authority (FCA) published a speech delivered by its chief operating officer, Emily Sheppard, at the UK Sustainable Investment and Finance Association Leadership Summit in London, entitled ‘All aboard: strong infrastructure for smooth journeys’. The speech highlights that: The FCA’s objectives aim to underpin the growth of the economy and encourage investment required for UK and financial services to achieve net zero by 2050. The FCA plans to continue to engage with industry, balancing proportionate regulations more broadly while recognising and avoiding unnecessary regulatory pressures and costs on businesses. The expansion of the FCA to Leeds and Edinburgh is intended to enable it to attract new talent and better reflect the demographic of firms nationwide. Ms Sheppard discusses topics including: Recent regulatory changes introduced by the FCA to encourage sustainable investment, including the Sustainability Disclosure Requirements and investment labels regime, and the anti-greenwashing rule guidance. The FCA’s involvement in wider initiatives such as the Government’s recently published Transition Finance Market Review and its Transition Plan Taskforce. The Government’s plans for the FCA to regulate ESG ratings providers. The FCA’s intention to consult on strengthening expectations for listed companies’ transition plan disclosures, with the aim of giving investors transparency on a business’ future alignment with net-zero goals. The recent Call for Input on the FCA’s review of its rules following the introduction of the Consumer Duty – Ms Sheppard notes that the FCA is current reviewing 172 responses to the Call for Input and plans to feed back next year, with the aim of addressing areas of duplication, confusion or over-prescription which create unnecessary costs for business while at the same time demonstrating that it is possible to pursue market growth through sustained consumer benefit.

The UK government has today published its long-awaited guidance to organisations on the new offence of failure to prevent fraud (here) and confirmed the offence will be in force from 1 September 2025. Under the new offence an organisation (whether or not it is a UK organisation) may be criminally liable where an employee, agent, subsidiary, or other “associated person”, commits a fraud intending to benefit the organisation, where that fraud has a UK nexus, and the organisation did not have reasonable fraud prevention procedures in place. This new offence is a hugely significant development and is intended to have a similar impact to the UK Bribery Act 2010, both in terms of driving changes in compliance and culture and in leading to deferred prosecution agreements and prosecutions. The guidance covers both the elements of the offence itself and importantly advice on what constitutes reasonable fraud prevention procedures. We have previously considered the new offence and how best to prepare (see articles below). We are arranging roundtable discussions in the coming weeks to discuss how to prepare for the new offence. Please contact debbie.pinner@nortonrosefulright.com if you would like to attend. Failure to prevent fraud: What’s the current status and what should organisations be doing now? | United Kingdom | Global law firm | Norton Rose Fulbright Failure to prevent fraud: what do I do now? Part 1: Risk assessments | Global Regulation Tomorrow Failure to prevent fraud: what to do now? Part 2: Policies and procedures | Global Regulation Tomorrow Failure to prevent fraud: what to do now? Part 3: Tone from the top and training | Global Regulation Tomorrow

On 31 October 2024, the Bank of England (BoE) published a speech by Sarah Breeden (Deputy Governor, Financial Stability) at the HKMA-BIS Joint Conference on Opportunities and Challenges of Emerging Technologies in the Financial Ecosystem. In this speech, Ms Breeden explores the novel features of Generative AI (GenAI), and how we can uphold financial stability whilst harnessing its potential benefits for economic growth. Potential benefits The speech begins by noting that GenAI is expected to bring considerable potential benefits for productivity and growth in the financial sector and the rest of the economy. But for the financial sector to harness those benefits financial regulators must have policy frameworks that are designed to manage any risks to financial stability that come with them. Economic stability underpins growth and prosperity. It would be self-defeating to allow GenAI to undermine it. Two issues to keep an eye on Whilst the financial services industry is still in the early stages of adopting GenAI Ms Breeden states that regulators should keep a ‘watchful eye’ on two issues: At the micro-prudential level, central banks and financial regulators should continue to assure themselves that technology-agnostic regulatory frameworks are sufficient to mitigate the financial stability risks from GenAI, as models become ever more powerful and adoption increases. At the macro-prudential level, to be aware of the possible need for intervention to support the stability of the financial system as a whole. Regulatory perimeters should be kept under review should the financial system become more dependent on shared AI technology and infrastructure systems. AI Consortium Ms Breeden refers to the AI Consortium that the BoE is launching to help further understanding about AI’s potential benefits and the different approaches firms are taking to managing those risks which could amount to financial stability risks.  The Financial Policy Committee (FPC) will publish its assessment of AI’s impact on financial stability and set out how it will monitor the evolution of those risks going forward AI in financial services Ms Breeden then refers to the results of a periodic survey that the BoE issued regarding the use of AI in financial services: 75% of firms surveyed are using some form of AI in their operations, including all of the large UK and international banks, insurers and asset managers. 41% of respondents are using AI to optimise internal processes, while 26% are using AI to enhance customer support, helping to improve efficiency and productivity. 16% of firms are using AI for credit risk assessment, and a further 19% are planning to do so over the next three years. 11% are using AI for algorithmic trading, with a further 9% planning to do so in the next three years. 4% of firms are already using AI for capital management, and a further 10% are planning to use it in the next three years. Many firms are using AI to mitigate the external risks they face from cyber-attack (37%), fraud (33%) and money laundering (20%). What might AI mean for micro-prudential supervision? Ms Breeden discusses what AI might mean for micro-prudential supervision and the Discussion Paper that the BoE and the Financial Conduct Authority issued in 2022 (DP5/22). She notes that respondents to the Discussion Paper highlighted the risk that the model risk management principles the regulators set outmight not be sufficient to ensure model users fully understand the third-party AI models they deploy within their firms. And so, regulators, need to consider what explainability means in the context of generative AI, what controls they should expect firms to have and what that means for regulatory and supervisory frameworks. Ms Breeden also states that feedback to the Discussion Paper also noted the lack of clear, widely applicable standards around the data which AI models are trained on. Only a third of respondents described themselves as having a complete understanding of the AI technologies they had implemented in their firms. That said, as firms increasingly consider using AI in higher impact areas of their businesses such as credit risk assessment, capital management and algorithmic trading, they should expect a stronger, more rigorous degree of oversight and challenge by their management and boards. Ms Breeden added that respondents agreed that practical guidance would be helpful on what ‘reasonable steps’ senior management might be expected to take with respect to AI systems to comply with regulatory requirements. What might AI mean for macro- prudential policy? Ms Breeden advises that an issue the BoE worries about all the time as macro-prudential policymakers is interconnectedness – where the actions of one institution can affect others, firms can become critical nodes, and firms can be exposed to common weaknesses. AI could both increase such interconnectedness and increase the probability that existing levels of interconnectedness threaten financial stability. AI could also increase the probability of existing interconnectedness turning into financial stability risk – in particular through cyber-attacks. But it could also aid cyber attackers – for example through deepfakes created by GenAI to increase the sophistication of phishing attacks. Ms Breeden also highlights the potential for system-wide conduct risk. If AI determines outcomes and makes decisions, what would be the consequences if, after a few years, such outcomes and decisions were legally challenged, with mass redress needed?

On 1 November 2024, the Financial Conduct Authority (FCA) updated its Sustainability disclosure and labelling regime webpage to include a document providing examples of pre-contractual disclosure across a selection of labels. The document notes that the Sustainability Disclosure Requirements (SDR) and investment labels regime is a new regime with firms having been able to use investment labels since 31 July 2024. As the regime is still evolving the non-exhaustive examples in the document cover a selection of labels and are intended to meet the disclosure requirements based on the FCA’s experience of applications to date.

On 5 November 2024, the Network for Greening the Financial System (NGFS) published the fifth vintage of its long-term climate macro-financial scenarios for forward-looking climate risks assessments. The NGFS scenarios explore the transition and physical impacts of climate change, over a long-time horizon and under varying assumptions. The main development of this fifth phase is an updated assessment of physical risk. It now incorporates a new damage function, resulting in more substantial physical impacts from climate change. NGFS scenarios have also been updated with new economic and climate data, policy commitments, and model versions. The scenarios now incorporate the latest GDP and population projections of the IPCC’s Shared Socioeconomic Pathways. In addition, they include the most recent country-level climate commitments as of March 2024. The NGFS has also published three supplementary documents to provide guidance to central banks and supervisors on the use of the scenarios: A high-level overview of the updates in the Phase V publication package, with a specific focus on the new damage function used for (chronic) physical risk assessment. A more detailed explanatory note on the new damage function. An updated technical documentation which discusses the NGFS modelling framework and assumptions behind the scenarios.

On 5 November 2024, the Single Resolution Board (SRB) issued guidance on the minimum bail-in data template. The guidance provides for an integrated approach for implementing the SRB’s bail-in operational guidance by enhancing definitions and providing a template to ensure structured and standardised data collection. It also includes country-specific fields, as national resolution authorities are responsible for implementing the SRB’s bail-in decisions at national level. The guidance also includes, in Annex II, mapping with the data points of the SRB’s Bail-in Data Set and the Liability Data Report 10, in order to help reporting agents to align with other data sources and ensure consistency between similar data points. Next steps EU institutions have 12 months to adapt to these requirements, with an additional six months for some elements.

On 5 October 2024, the Financial Conduct Authority (FCA) published a policy statement, PS24/14, on improving transparency for bond and derivatives markets. PS24/14 also includes a discussion paper (in Chapter 9) on the future of the SI regime. Background The FCA consulted on its proposed changes in December 2023, in CP23/32, as part of the Wholesale Markets Review (WMR). The WMR had previously concluded that the existing transparency regime for bond and derivatives markets had not delivered meaningful transparency and had limited impact on price formation while imposing a high cost to industry. New transparency rules The new transparency rules for bonds and derivatives markets are intended to result in more information for investors and lower costs for firms. They aim to create a simpler and more timely post-trade transparency regime based on fewer deferrals for bonds and certain over-the-counter (OTC) derivatives, while ensuring that liquidity providers are sufficiently protected against undue risk.  Under the new rules: Transparency requirements are specified only for bonds admitted to trading on a trading venue and certain derivatives subject to the clearing obligation. The OTC trading of non-specified instruments by investment firms will not be subject to public trade reporting. For trading venues, there are standards and criteria they should consider when calibrating their transparency requirements. For recognised investment exchanges, the FCA’s supervisory approach to transparency aims to reflect the high standards that apply to them in relation to exchange-traded derivatives such as futures and listed options. The requirement to perform transparency calculations, which had been used to determine whether an instrument was liquid, has been removed – the FCA will now rely instead on a set of reliable proxies to determine whether an instrument should be categorised as liquid. The use of the Financial Instruments Transparency System for bonds and derivatives is being discontinued, as the new transparency regime does not depend on rigid liquidity calculations based on fixed parameters. The definition of systematic internalisers (SIs) has been updated from a quantitative to a qualitative definition (although the FCA does not expect the new definition to alter which firms are designated as SIs). Discussion paper In Chapter 9 of PS24/14, in light of the breadth of changes made through the Financial Services and Markets Act 2023, the FCA is asking discussion paper questions about the future of the SI regime, in particular for bonds and derivatives. The discussion paper does not put forward proposals for consultation but instead asks questions for discussion. However, the FCA notes that, with the implementation of the new definition of an SI on 1 December 2025, it would be good to try and implement substantive changes to the obligations applying to SIs by that date. The discussion paper closes on 10 January 2025. Next steps for firms The changes to the transparency regime will come into force on 1 December 2025. The FCA is asking trading venues, investment firms and approved publication arrangements (APAs) to familiarise themselves with the rules to ensure they can comply with the relevant requirements, and to assess their current arrangements so they can provide adequate transparency once the rules take effect. Under transitional provisions: Trading venues will not need to apply pre-trade transparency to voice and request-for-quote trading from 31 March 2025. SIs in bonds and derivatives will not need to provide public quotes from 31 March 2025. Next steps for the FCA The FCA plans to speak to trading venues, investment firms and APAs to monitor the implementation of the new rules and ensure an orderly implementation of the changes. It notes that the bond consolidated tape will only go live after the changes to the transparency regime take effect. The FCA expects to start the tender to appoint a UK bond consolidated tape provider in December 2024, to give firms wishing to take part some time to familiarise themselves with the new rules.   A consultation on the future of the SI regime is planned for Q2 2025, following responses to the discussion paper. The FCA expects the changes to the substance of the SI regime to take effect alongside the new qualitative approach to determining SIs on 1 December 2025. The FCA says it will update its Handbook to reflect the finalised transparency regime for bond and derivative markets by 1 December 2025, when the rules in the instrument in PS24/14 are due to come into force.

On 5 October 2024, the Financial Conduct Authority (FCA) published a consultation paper, CP24/21, on investment research payment optionality for fund managers. CP24/21 sets out proposals to take forward the recommendations of the Investment Research Review and feedback to the FCA’s previous consultation (CP24/7) on payment optionality for investment research. The FCA finalised rules in July 2024 allowing institutional investors more flexibility in paying for investment research, and following feedback from industry, it is now proposing to extend the new payment optionality to pooled funds, to make it operationally more efficient for asset managers of different business models and sizes to take up the new payment option to pay for investment research. The proposals will apply to UCITS management companies, full scope UK alternative investment fund managers (AIFMs), small authorised UK AIFMs and residual collective investment scheme operators, and an investment platform provider. Next steps The deadline for responses to CP24/21 is 16 December 2024. The FCA says it will consider all feedback and, if it chooses to proceed, it will aim to publish any rules or guidance in a policy statement in H1 2025.

On 5 October 2024, the Financial Conduct Authority (FCA) opened its AI Input Zone, through which it is inviting stakeholders to provide their views on  current and future uses of artificial intelligence (AI) in UK financial services, as well as the financial services regulatory framework. As one component of the FCA’s AI Lab, launched in October 2024, the AI Input Zone is intended to help the FCA to support safe and responsible innovation, promote growth and competitiveness of the sector, and gain a practical understanding of AI usage in financial services. The FCA is seeking a wide range of views from different market participants to understand what transformative use cases may develop, and what it can do to support opportunities for beneficial innovation. The AI Input Zone is part of wider evidence gathering aimed at helping shape the FCA’s future regulatory approach. Stakeholders are reminded that they can apply to participate in other elements of the AI Lab that may be of interest, such as the AI Sprint. The questions on which the FCA is inviting views within the AI Input Zone relate to: What AI use cases stakeholders are considering or exploring in their firm or organisation, and what transformative AI use cases look like in the next 5-10 years. Whether there are any barriers to adopting these use cases currently or in the future. Whether current financial services regulation is sufficient to support firms to embrace the benefits of AI in a safe and responsible way, or whether it needs to evolve. What specific changes or additions to the current regulatory regime, or areas of further clarification or guidance, are needed. Next steps Responses to the questions set out in the AI Input Zone are requested by 31 January 2025.

In our EMEA regulatory insights series colleagues from our EMEA offices provide an update on some of the key regulatory issues they are seeing in their local market. In this latest episode Floortje Nagelkerke from our Amsterdam office discusses EU payment for order flow (PFOF). Listen to the podcast here.

On 31 October 2024, the Financial Conduct Authority (FCA) published a new webpage on operational resilience, setting out insights, observations and key lessons from how firms responded to recent outages and their preparedness to respond to future incidents. The FCA notes that there has been a continued trend of third-party related incidents since the beginning of 2023, and that third-party related issues having been the leading cause of operational incidents reported to the FCA between 2022 and 2023. It says these outages emphasise firms’ increasing dependence on unregulated third parties to deliver important business services, highlighting the importance of firms continuing to become operationally resilient in line with FCA rules. Firms in scope of policy statement PS21/3 on building operational resilience are reminded that by March 2025, they must ensure they can deliver important business services in severe but plausible scenarios, like recent outages, to help minimise the impact on consumers and markets. All firms, regardless of how they were affected by recent outages, are encouraged to consider the lessons set out on the new webpage, to improve their ability to respond to and recover from future disruptions.

In our latest podcast, our global Financial Services team discusses promotional messages on social media platforms, covering recent regulatory and enforcement developments in the UK, US and Dubai, as well as practical steps that global firms can be taking now in this area to manage their risk. Listen to the episode here. This is a two-part podcast series on Navigating Communications – the first of our podcasts covered off-channel messaging and is available here.

On 4 October 2024, the Treasury Committee announced that it is investigating whether there is a need in the UK to regulate or mandate the acceptance of physical cash in the form of notes and coins. A call for evidence has been launched as part of the inquiry. The inquiry will consider whether legislation and/or regulation is needed to govern the acceptance of physical cash in the UK, and potential costs to consumers and businesses. There are currently no regulations requiring businesses to accept cash. The Treasury Committee explains that the Bank of England has noted an increase in the infrastructure costs of retaining physical cash as a viable payment method as a result of the decline in cash usage, which it warns could lead to disruption for businesses and consumers. It also flags that others have highlighted the dangers of an overreliance on digital payments, suggesting cash acceptance should be viewed as ‘a form of civil preparedness’. The call for evidence closes on 2 December 2024.

On 4 October 2024, the Financial Conduct Authority (FCA) issued a statement welcoming the first industry-led Project Guardian report on tokenisation in the asset management sector. Background Project Guardian is an international collaboration of industry and regulators, led by the Monetary Authority of Singapore (MAS), that explores the use of fund and asset tokenisation. The report was produced by its asset and wealth management workstream. The FCA is a member of Project Guardian’s policymaker group and takes part in the asset and wealth management workstream. It explains that together with the MAS and the broader Project Guardian policymaker group, the FCA has worked with Singapore, UK and international firms within the Project Guardian membership to develop the use-cases explored in the report, including at the Point Zero Forum in Zurich.  The statement also flags that the FCA and HM Treasury are observers on the industry-led Technology Working Group of the Government’s Asset Management Taskforce that is considering the implementation of fund tokenisation in the UK.   The report The report sets out an ‘ambitious, phased vision’ for the use of distributed ledger technology in asset management. It also discusses potential industry and regulatory standards needed to scale tokenisation use-cases and to enable firms and investors to benefit from the technology. The FCA plans to continue working with Project Guardian members and the sector to support the development and adoption of asset tokenisation. It also flags that it will collaborate in 2025 with the MAS to explore the regulatory considerations for tokenisation within the asset and wealth management sector, considering as part of the review: The regulatory and supervisory principles that could apply to tokenisation use-cases to support consumers and the integrity of markets. Any potential regulatory barriers to continuing maturity of tokenisation concepts.

On 4 October 2024, the Financial Conduct Authority (FCA) published a portfolio letter to CEOs of self-invested pension plan (SIPP) operators, setting out a summary of its priorities, its expectations of SIPP operators and the work it intends to do. The FCA flags that this is an important supervisory portfolio for the FCA as the SIPP product can play a key role in enabling consumers to plan for their retirement with a greater degree of flexibility and control; however, average SIPP pension pot sizes are often higher than other types of person pension meaning harm to individual consumers can be greater when issues materialise. In light of this, the FCA wants the SIPP portfolio to deliver high standards and for consumers investing in SIPPs to do so with confidence, understanding the risks they are taking, and the regulatory protections provided. New key focus areas highlighted in the letter include: Redress payments to consumers for due diligence failings. The handling of pension scheme money and assets. Accuracy of firms’ books and records. Implementation of the Consumer Duty. The FCA reminds CEOs that they are responsible for ensuring their firm meets FCA requirements, including the obligations and requirements set out in the letter, and that they should take all necessary action to ensure they are met. The FCA warns that it may ask CEOs to assess their business against these areas of concern and explain the actions they have taken, using the Senior Managers and Certification Regime to engage directly with accountable individuals on specific areas of concern. The letter concludes by noting that the FCA’s proactive strategy will focus on the areas addressed in this letter and its previous May 2023 letter, and it will expect firms to demonstrate how they have fully implemented the concerns highlighted in the firm’s work plan.

In the latest podcast in our EMEA regulatory insights series Anna Carrier from our Brussels office discusses the recent changes to the European Regulation on wholesale energy market integrity and transparency (REMIT 2). In particular we cover: The key changes to the Regulation. Cross-border impact. Algorithmic trading in wholesale energy markets. Data reporting. Listen to the podcast here.

Introduction On 1 November 2024, the Financial Conduct Authority (FCA) issued Finalised Guidance 24/5 ‘Prudential Assessment of Acquisitions and Increases in Control’ (FG24/5). On the same date the FCA and the Prudential Regulation Authority (PRA) issued a joint Policy Statement providing feedback to the responses received to Consultation Paper 25/23 on prudential assessment of acquisitions and increases in control. The Policy Statement also contains: PRA Supervisory Statement 10/24 – Prudential assessment of acquisitions and increases in control (SS10/24) (Appendix 2). FG24/5 (Appendix 3). Updated PRA Statement of Policy – Interpretation of EU Guidelines and Recommendations: Bank of England and PRA approach after the UK’s withdrawal from the EU (Appendix 4). Changes The PRA and FCA have made changes to both SS10/24 and the FCA guidance following comments received at the consultation stage and minor changes to the language used in these documents to further enhance the clarity and readability of the documents. However, other than the differences between the two documents noted in the consultation, no material differences arise between the documents as a result of the consultation responses. The PRA and FCA have: Added new paragraphs on limited partnership structures to help with the identification of controllers within such structures and to address the responses received to the consultation around controller identification within limited partnerships that are typically used by private equity firms and hedge funds. Clarified what constitutes ‘significant influence’ to make it clearer that, when determining if there is significant influence, it is not just a case of being on the board of an authorised firm or its parent, but the ability to direct or influence decisions made by the authorised firm’s board. That direction or influence could be through a shareholder board appointment (to the UK authorised person or its parent) or other arrangement. Added a new paragraph in SS10/24 and FCA guidance explaining that as part of the PRA’s and FCA’s assessment/due diligence process they may contact relevant UK authorities and non-UK regulators to understand the timelines of their process and request any information relevant to the assessment against the section 186 Financial Services and Markets Act 2000 (FSMA) criteria. Next steps SS10/24 takes effect on 1 November 2024. When considering a UK change in control transaction, FCA authorised firms, and those persons to whom Part XII of FSMA applies, should follow FG24/5 from 1 November 2024 instead of the EU guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector (known as the 3L3 Guidelines).

On 1 November 2024, the Financial Conduct Authority (FCA) issued Handbook Notice 123. This Handbook Notice sets out the instruments that the FCA Board approved on 29 and 31 October 2024. The instruments that were approved are: Technical Standards (Bilateral Margining) (Amendment) Instrument 2024. In summary, this instrument makes consequential amendments to Binding Technical Standards (BTS) 2016/2251 to reflect the expected changes to Article 4 and 11 of UK EMIR made in the Securitisation (Amendment) Regulations 2024. Technical Standards (Credit Rating Agencies Regulation) (Amendment) Instrument 2024. In summary, this instrument makes a consequential amendment to the UK on-shored version of BTS 2015/2, the regulatory technical standards for the presentation of the information that credit rating agencies make available to the FCA. Handbook Administration (No 71) Instrument 2024. In summary, the amendments correct an error in SUP 16 Annex 48AR and DISP App 4.4.2R to provide clarity.

On 28 October 2024, the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) published the results of an explorative study (in the form of a report) into how asset managers deal with the availability, reliability and comparability of Environmental, Social and Governance (ESG) data. The study report includes key insights that can aid asset managers in developing processes, systems, and internal controls for effective risk management concerning the use of ESG data. The AFM oversees investment firms and managers of alternative investment funds and UCITS, ensuring compliance with rules for sound business operations and adherence to European laws on integrating sustainability risks into business processes and risk management. Asset managers need ESG data to identify sustainability risks, assess adverse impacts of investment decisions, and uphold the “do no significant harm” principle. They can obtain this data from issuers, develop it in-house, or buy it from third-party providers. However, challenges with data availability, reliability, and comparability mean these needs are not fully met, especially in the short term. Reliable, independent ESG data is essential for effectively managing sustainability risks in business and investment practices. To address this, the AFM conducted an exploratory study, gaining insights into how ESG data is managed and verified for accuracy and completeness. The AFM’s main observations were: Asset managers have established the governance structure with regard to the management of ESG data risks in different ways. Many asset managers use one or more third-party data providers for the majority of their ESG data needs. Using an unambiguous definition of data risk supports asset managers in identifying and managing this risk. All asset managers have both proactive and reactive policies and control processes to ensure the quality of ESG data.

On 28 October 2024, the Dutch Central Bank (De Nederlandsche Bank, DNB) published their findings from its sector-wide self-assessment on Environmental, Social, and Governance (ESG) risk integration among pension funds. The report reveals that while many pension funds have taken steps to incorporate ESG risk into their policies, there is still a substantial portion that lacks adequate insight into these risks. DNB launched this self-assessment to examine the level of ESG risk integration within various core processes like strategy, governance, risk management, and reporting. Using DNB’s Guide to Managing Climate and Environmental Risks as a framework, the self-assessment aimed to benchmark the industry against regulatory standards and gain insights into pension funds’ preparedness c.q. willingness to address ESG risks. The key findings from the self-assessment included: Despite recent efforts, 37% of pension funds have not started assessing ESG risks, falling short of the Pension Fund (Financial Assessment Framework) Decree Article 18 requirements. Additionally, 42% of funds with significant fossil sector exposure lack climate transition risk analyses. Although ESG principles are embedded in most funds’ strategies, only a minority have established measurable key performance indicators (KPIs) for ESG objectives. Most oversight is at board level, but only 17% of funds integrate ESG across all governance levels. Pension funds differ in their chosen ESG metrics, including carbon footprints, and biodiversity measures. A more standardized approach would enhance risk monitoring and mitigation. High-risk pension funds will receive in-depth tailored feedback, given by DNB, to implement. Furthermore, all funds are expected to conduct an ESG risk assessment by mid-2025. DNB’s update Guide to Managing Climate and Environmental Risks, set for release mid-2024, will offer practice tools and best practices to support ESG integration for all pension funds.