ESG Investing  

CFA Institute releases ESG disclosure standards

CFA Institute releases ESG disclosure standards

The CFA Institute has published its first ESG disclosure standards for investment products.

The association for investment professionals said today (November 1) the voluntary standards will provide investors with information about how investment products align their objectives, investment processes and stewardship activities with ESG considerations. 

The disclosures will be made at a pre-contractual level and will 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.

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The CFA Institute said period reporting “may be developed” in the future.

Margaret Franklin, president and chief executive of the CFA Institute, said the complexities of the ESG investing landscape remained 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," she said.

“The release of the standards marks one step in the broader efforts to make that a reality, and we believe an important one.” 

The standards have been developed following two industry-wide consultations. 

The disclosures are applicable across all investment vehicles and asset classes but are voluntary.

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.

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. 

“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.”

On Friday (October 29), the UK government announced it will introduce a law requiring 1,300 of the UK’s largest companies and financial institutions to report climate-related financial information.

The Treasury said the UK’s largest traded firms, banks and insurers, alongside private companies with more than 500 employees and £500m in turnover will be mandated to disclose climate-related risks and opportunities from April next year. 

Advisers too could be subject to new rules under plans mooted by the Treasury and regulator