Global investment professional association CFA Institute announced the publication of its updated position paper concerning ESG integration in the investment process.
According to CFA Institute, the ESG investing landscape has evolved rapidly since the publication of its prior statement in 2019, highlighting changes including the proposed EU Taxonomy for sustainable activities, the EU’s Non-Financial Reporting Directive (NFRD) requiring many EU companies to publish data on the impact their activities have on ESG factors, significant growth in interest in ESG investing in markets including the U.S., and the ongoing development of sustainability reporting standards by bodies such as SASB, TCFD and IFRS.
Some of the key points in CFA Institute’s ESG policy position focus on the responsibilities of investment managers with regards to ESG integration, disclosure standards for investment managers in relation to that integration, as well as the ongoing development of ESG reporting frameworks for companies. CFA Institute also promotes better disclosures regarding ESG financial products, and last year the organization launched an initiative to develop standards for these products.
The institute highlighted some of the key points from its statement:
- CFA Institute does not believe the integration of material ESG factors into the investment process is a violation of fiduciary duty.
- CFA Institute Code of Ethics Standards of Professional Conduct require CFA charterholders to conduct appropriate research and investigation of all material information relevant to their investment analyses and portfolio management decisions. This of course, can include material ESG data.
- CFA supports mandated disclosures of investment managers regarding if, and how, a manager covers integration of ESG. (just explain what you do, if anything).
- CFA does not support mandated integration, nor should regulators, that every regulated investment manager must integrate ESG factors.
- CFA Institute favors a comply – or -explain model for disclosure requirements around material ESG data.