With COP 26 underway, the International Organisation of Securities Commissions (IOSCO) is calling on asset managers to ramp up efforts to combat greenwashing.
To this end, the umbrella group for regulators in the US, Europe, Asia and elsewhere has published five detailed recommendations to consider as they develop sustainability-related rules and regulations for asset managers.
They include setting sustainability-related risk assessment and disclosure expectations for asset managers, improving regulation of product-level disclosures of sustainability risks to investors, and introducing supervisory and enforcement tools to ensure compliance with sustainability assessment and disclosure rules.
Re
gulators were also advised to encourage global asset managers to develop common sustainability definitions and promoting investor education initiatives regarding sustainability.
They follow on from the launch in June of IOSCO’s consultation related to protecting investors from ‘greenwashing’ by asset managers.
“These recommendations are aimed at making sure sustainability-focused products say what they do, and do what they say,” said Ontario Securities Commission (OSC) chief executive Grant Vingoe, who co-leads the IOSCO workstream that developed the report along with Hong Kong Securities and Futures Commission (HKSFC) executive Director Julia Leung.
“The different areas covered in the recommendations all contribute to the objective of preventing greenwashing,” he told press at a briefing. “In particular, the recommendations are aimed at preventing greenwashing at each stage of the lifecycle of a sustainability focused product.”
“Setting regulatory and supervisory expectations is therefore fundamental to addressing issues relating to risk mismanagement and greenwashing,” said Erik Thedeen, head of Sweden’s financial markets watchdog and chair of the IOSCO taskforce which drafted the recommendations, said in a statement.
At asset manager level, the recommendations in the report focus on the four core pillars of the Task Force on Climate-Related Financial Disclosures (TCFD) – governance, strategy, risk management, and metrics and targets.
Product-level recommendations include setting basic parameters around accurate labelling, sustainability investment objectives and risk disclosure, and shareholder engagement activities disclosure.
IOSCO, whose members regulate 95% of the world’s securities markets, will also later this month set out ways to make ESG ratings and data, widely used by asset managers for marketing sustainable funds, more rigorous and transparent.
©Markets Media Europe 2021
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