The CFA Institute has published its first environment social and governance (ESG) disclosure standards for investment products in an effort to mitigate greenwashing.
The association for investment professionals said the aim is to support investors, consultants, advisers and distributors with information that is complete, reliable, consistent, clear, and accessible.
They will enable market participants to better understand and compare ESG investment products.
The standards follow an industry-wide consultation and will apply to all types of investment vehicles, asset classes, and ESG approaches.
The disclosures include the sources and types of ESG information used by the investment products to define their ESG credibility, as well as the environmental and social impact objectives of the product and any portfolio-level targets.
They do not include corporate-level reporting or disclosures, naming, labelling or rating products, or the content of investment products’ periodic reports.
A handbook and optional template for ESG disclosure will be available in 2022. Standards for period reporting, “may be developed” in the future, according to the CFA.
Margaret Franklin, president and chief executive of the CFA Institute, said the complexities of the ESG investing landscape remained vast.
She added, “We must identify ways to mitigate greenwashing and preserve the integrity of the information being shared about ESG investment products to make them more understandable and comparable to the end investor.
The release of the standards marks one step in the broader efforts to make that a reality, and we believe an important one.”
Paul Andrews, managing director of research, advocacy, and standards at the CFA Institute, said, “Although there are differing regulations in global markets to address transparency for investors on ESG matters, it is critically important that a harmonised, global approach exists to enable investor protection.
He noted, “Such regulation does not always comprehensively cover all market participants.
The standards fill these market needs on a global scale, facilitating important disclosures that will drive greater communication between the buyers of investment products and an industry marketing increasing numbers of funds and strategies that offer an ESG-centric approach.”
©Markets Media Europe 2021
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