We invested in sustainability early as it is core to our purpose: benefiting our customers, shareholders, society, and the environment. For us, sustainability is an opportunity to build value, manage risk, comply with regulations and meet our growing stakeholder expectations. Having navigated the beginning of our own sustainability journey, we want to share our experience to provide a starting point for other fintechs.

Building sustainability into a fintech can be challenging, especially when considering the numerous acronyms, frameworks, and regulations that exist on top of other standard financial requirements. In this blog, you will find an introduction to some of the key sustainability topics and regulations relevant to UK fintechs.

Important caveat: We are not legal advisers. All companies should consult their own counsel to understand their regulatory obligations. This blog may not be comprehensive and the regulatory agenda is rapidly evolving.

What we mean when we say sustainability

Sustainability in fintech means a lot of things. For clarity, as defined in our Sustainability Policy, we use the term “sustainability” to talk about how we manage environmental and social responsibilities across our business, ranging from how we treat our people, the outcomes we create for our customers, our environmental impact, and more.

Sustainability and environment, social, and governance (ESG) are often used interchangeably in industry contexts. At Griffin, we view these terms differently‍—‌while sustainability is the why and what, ESG is more the ‘how’, applying to a framework for understanding and managing the risks and opportunities related to sustainability topics.

If you are just starting your sustainability journey, it makes sense to understand the broader context of these topics first. Good resources for understanding and identifying relevant sustainability topics are:

• UN Environment Programme (UNEP) finance initiative impact radar
• Sustainability Accounting Standards Board’s (SASB) materiality map (This lists disclosure topics by sectors. At Griffin, we use banks and tech companies as guidance)
• 2023 UK green finance strategy glossary in annex 3

UK business requirements related to sustainability and ESG topics

In the UK, the type of business (e.g. asset manager, listing status) and size of the business (by employee number and revenue) are factors that determine some of the regulations and requirements that it may be in scope for. These include:

• Gender Pay Gap for companies with more than 250 employees
• Modern Slavery Act addressing human rights and forced, compulsory labour in the supply chain
• Streamlined Energy Reporting (SECR), a simplified view of energy use and carbon emissions for UK companies of a certain size

Fintech regulation in the UK

Law firm Slaughter and May notes that there’s no specific regulatory framework for fintechs in the UK. Fintechs are covered within the standard financial regulatory frameworks that exist. That’s important to note because these regulations have been designed to be broad and open to interpretation when applied to a company's business model and context.

With the passing of the Financial Services and Markets Act 2023 and the Edinburgh Reforms, we can deduce that the UK is in a period of significant regulatory changes and fintechs need to be aware of these financial regulations and follow them closely.

Here’s a look at some of the sustainability regulations that are relevant to fintechs:

ESG regulatory priorities in financial services

ESG-related regulatory requirements for UK fintechs

In addition to these regulations, fintechs need to also take into account newly implemented regulations and those bubbling up in the local and international scene like the:

• Consumer duty principle focused on ensuring positive customer outcomes and protecting vulnerable customers (see more from Griffin).
• TNFD framework framework focused on nature and biodiversity risks.
• TISFD focused on financial inclusion, inequality and social impact.
• CSDDD focused on sustainability due diligence, human and environmental rights in the EU, and more.

While some of these regulations are already in effect, others are emerging. The regulatory landscape continues to evolve and there is a clear trend towards increased disclosure and management of sustainability-related risks and impact.

Taking action

• Know the important issues that apply to your business. SASB’s materiality map, part of the IFRS Foundation’s remit, is a great resource to look at key sustainability topics by sector. As a bank and a fintech, we looked at topics across both industries to understand what was most relevant to our context. We also looked at the B Impact Assessment and B Corp certification framework. Understanding your sustainability impacts requires going beyond the external issues that can impact your business and looking at how your business affects the external world - the environment, people and society. For some fintechs this may be looking at potential positive impacts to enable financial access, inclusion or security, providing access to good work and fair opportunities or reducing climate impact with more efficient, digital processes and operations.

• Identify your areas of impact, goals and team. Once we knew the issues that mattered to us, our sustainability steering group, made up of leaders from operations, finance, risk, people and our leadership teams, came up with our goals and targets. We set up an ongoing meeting to ensure we hold ourselves accountable for progress towards our goals.

• Get some training. There are paid and free courses for fintech companies on all kinds of sustainability topics. From understanding climate risk and disclosure (provided by the TCFD) to calculating the emissions related to your portfolio and investments (provided by the PCAF), there are tons of material available online that your team can leverage.

• Look ahead and across the horizon. We embedded a horizon scanning processes to continuously keep an eye on our regulators and other key industry sources, review new papers and determine the importance and urgency of new regulation. We held internal trainings for anti-greenwashing, and we will cover new expectations around DE&I and sustainability disclosures when the reporting consultations go live in the coming months.

• Work together with the sector. We work with relevant industry groups that bring together the sector for education, action and engagement. Here are some of the sustainability groups that we follow and/or work closely with:

What’s clear is that sustainability regulations are not going away. As regulations continue to evolve, proactive fintechs will find themselves well-positioned to thrive in an increasingly sustainability-focused market.

Start your sustainability journey today, and help drive the shift towards net zero in the UK.