Global investment professional association CFA Institute announced today the publication of Global ESG Disclosure Standards for Investment Products, the first voluntary set of reporting standards for the investment industry, aimed at providing transparency and comparability of investment products with ESG-related features.
The organization is launching the standards as major capital flows are being directed towards sustainable investments, resulting in a major proliferation in ESG-themed products and strategies. While this proliferation has provided investors with significant growth in their options for ESG investments, a lack of standards and common terminologies creates difficulties for investors to understand and compare products. In addition to meeting the need for consistency, the standards also aim to address the increase in greenwashing, which is feared may lead to an erosion of trust in the investment management industry, particularly related to ESG investing products.
Margaret Franklin, CFA, President and CEO, CFA Institute, said:
“We’re proud to release the first edition of the Standards after a multi-stage development process to ensure the result is additive, has impact, and is meaningful to the industry. The complexities of the ESG investing landscape remain vast. 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.”
According to CFA Institute, the new standards apply to all types of investment vehicles, such as pooled funds, ETFs, insurance-based investments products, and managed accounts, among others, and span all asset classes from listed equities to fixed income, private debt and equity, infrastructure and real estate. Additionally, the standards are aimed at covering all ESG approaches, including ESG integration, exclusion, screening, best-in-class, thematic, sustainability themed investing, impact investing, and stewardship, and consider both passive and active strategies.
Paul Andrews, Managing Director for Research, Advocacy, and Standards at 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 harmonized, global approach exists to enable investor protection. Furthermore, 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.”
The publication of the standards follows a series of consultations, including one on the development of the standards in August 2020, and another after the publication of the first draft version of the standards in May 2021.
Click here to view the CFA Institute’s Global ESG Disclosure Standards for Investment Products.