Building investor trust through voluntary ESG disclosure standards
In a step towards uniformity and transparency for investors, global asset managers in Australia are being urged to adopt voluntary global ESG disclosure standards.
With greenwashing remaining a top priority of concern in 2023 for the Australian Securities and Investments Commission (ASIC), managers could avoid misleading consumers of the green credentials of their products by providing information that is “complete, reliable, consistent, clear, and accessible”, said Lisa Carroll, chief executive of CFA Societies Australia.
“We believe the CFA Institute Global ESG Disclosure Standards for Investment Products can help asset managers avoid greenwashing outcomes and the need for global uniform standards has never been greater with so much money pouring into the sector,” she stated.
The Global ESG Disclosure Standards for Investment Products provided managers with a model set of disclosure requirements which help avoid greenwashing by identifying key information that should be disclosed.
Carroll explained: “It is not uncommon to see asset managers use the same term to refer to different ESG approaches or types of investment products or to see different terms applying to the same ESG approach or investment type.
“The combination of these factors has resulted in an increase in ‘greenwashing’ and this threatens to undermine trust in the financial services industry.”
A mandatory climate-related financial disclosure remained in the works in Australia since it was announced in December 2022, following the lead of the European Union’s Sustainable Finance Disclosure Regulation (SFDR) which imposed requirements on improved transparency for ESG funds.
According to Caroll, clear disclosure guidelines for asset managers would “play an important role in building and maintaining trust in financial services by better allowing investors to understand, evaluate, and compare investment products that incorporate one or more ESG approaches”.
Previously, a top sustainability executive had stated ethically-driven investors were ‘blind dating’ without a comprehensive agreed framework towards sustainable finance.
AUTHOR
Rhea Nath
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