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ESG Dominates FIs’ Regulatory Landscape – KPMG UK

ESG and sustainable finance regulations have once again emerged as the primary source of pressure for financial firms, with a score of 8.5 out of ten, according to Big Four consultancy KPMG UK’s third edition of its ‘Financial Services Regulatory Barometer’. This trend highlights increased scrutiny in areas such as greenwashing, more stringent disclosure requirements, and heightened expectations from regulatory authorities. The newly published report, which offers a biannual assessment of the regulatory challenges encountered by financial institutions in the UK and EU, reveals an aggregate regulatory Impact Score of 7.2 out of ten, slightly up from seven in February, indicating a sustained high level of regulatory pressure within the UK and EU financial sectors. Rob Smith, Head of KPMG Risk and Regulatory Advisory, said: “Continued economic uncertainty, inflation, and recent market departures have sparked critical discussions about regulatory approaches. The unyielding focus on ESG and sustainable finance persists, as supervisors and customers heighten their demands.” A noteworthy finding in the report is the growing divergence in regulatory approaches between the UK and EU. While both share common regulatory concerns and collaboration efforts, their policy solutions are beginning to diverge in detail and timing. This adds complexity for cross-border financial institutions operating in both jurisdictions. Michelle Adcock, Director in KPMG’s Regulatory Insight Centre, said: Post-Brexit, the UK has shifted toward a more UK-centric and principles-based approach to rulemaking, while the EU maintains a complex legislative agenda for financial services. Both regions are evaluating the impact of regulation on competitiveness.

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