52 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s Add to this a regulatory domain that is seeking to keep up with rapidly changing requirements – and the potential risks it presents – and the complexity of the operating environment increases even more. This is all before you consider the complications that current geopolitical tensions bring for all these stakeholders. Participants in this system tend to move at different speeds, and the divergence in these timelines creates great tension as a result. Large, public companies need time to contemplate questions around sustainability and resilience, to allocate the necessary resources to drive those strategic choices, while also remaining profitable. Regulators also need time to consult the industry, draft and deliver policy and then implement. In parallel, investors act with discretion to promptly reallocate capital to companies and fund managers that match their current investment goals. By extension, fund managers and advisers need to move at pace to compete with their rivals in attracting these funds, often by creating and promoting new products that seemingly match the investment mood of the day. Short-term fixes, however, do not always align with longterm planning. The regulatory environment and associated reporting requirements are playing catch up with new demands; and while ESG vocabulary remains open to definition, and therefore interpretation, companies and fund managers will remain under pressure to protect their existing investor base or attract new clients. “Greenwashing” is but one early symptom of this gap and, therefore, enforcement agencies must respond. This is not a new or unique trend. The Foreign Corrupt Practices Act in the late 1990s – a law originally passed in 1977 – was prompted by a period of global economic growth and feelings of an uneven playing field in terms of business practices. The Act, when it was enforced by the SEC and DOJ, sparked an overhaul of the anti-corruption and anti-bribery landscape. Overnight, behaviours that had previously
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