CFA Institute issues ESG disclosure standards for investment products

Non-profit organization CFA Institute has released the first voluntary global ESG disclosure standards for investment products to help financial stakeholders adequately evaluate ESG investment products.

The release followed a consultation to create standards based on the principles of fair representation and full disclosure of ESG issues within the investment process, objectives, and stewardship activities of investment products.

The standards apply to all types of investment vehicles and asset classes but are voluntary.

“The Global ESG Disclosure Standards for Investment Products are the first voluntary, global standards that have been designed to accommodate the full range of investment vehicles, asset classes, and ESG approaches offered in markets around the world,” Chris Fidler, senior director of global industry standards at CFA Institute told SRI Exchange.

“They simultaneously address areas where there currently are no regulations or voluntary standards as well as inconsistencies in disclosure expectations among different markets and product categories,” he added.

The standards were informed by two rounds of public consultation, the first of which was published in August 2020 and sought industry, regulatory and public comment on the proposed scope and structure of the standards.

They have been jointly approved by CFA Institute and its ESG technical committee, chaired by Bruno Bertocci, managing director and head of sustainability in active equities at UBS Asset Management in the US.

“The Standards have been designed to complement, and not conflict with, national and regional regulation. They are intended to be a helpful resource for regulators as they develop rules and guidance for their jurisdictions,” said Fidler.

ESG investors continue to report data as an issue despite increasing demand for socially responsible investment products globally.

A poll of institutional and high-net-worth (HNW) investors and their advisors, conducted by Federated Hermes, found that almost three quarters, 71%, of respondents were concerned about the “quality of data and measurement” from companies in their investment portfolios.

In September, the SEC called for investment managers to explain the standards they use for classifying funds as ‘focused on’ or ‘aligned to’ ESG goals, whilst in the UK the CMA placed a New Year deadline on businesses failing to comply with the law on green claims.