CFA Institute launches ESG disclosure standards

The CFA Institute has announced the first voluntary global environmental, social and governance (ESG) disclosure standards for investment products designed to enable investors to better understand, compare and evaluate ESG investment products.

The standards would apply to all types of investment vehicles, asset classes, and ESG approaches, and would aim to support investors with complete and accessible information.

Margaret Franklin, CFA Institute, president and chief executive, 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”.

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“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.”

If an investment manager signed onto the standards, some of the areas they needed to disclose were:

  • The elements of the investment process that use ESG information and how the ESG information was used;
  • Risks and limitations of ESG information used and how those risks and limitations were managed;
  • The characteristics of investments being excluded on ESG grounds and the threshold or condition against which the characteristic was compared. And whether the investment was excluded from, or was eligible for inclusion in, the portfolio when the threshold or condition was met;
  • How a portfolio-level ESG characteristic was measured and how a target portfolio-level ESG characteristic was expected to be obtained;
  • The investment product’s stewardship activities if requested by the investor; and
  • Impact objectives in measurable or observable terms if that was the intention of the product.

The global ESG standards did not address corporate ESG reporting, firm-level ESG disclosures (with an exception related to stewardship activities), naming, labelling or rating of investment products or the content of investment product’s periodic reports.

Public consultation in August 2020 and May 2021 informed the first edition of the Global ESG Disclosure Standards for Investment Products. The standards were jointly approved by CFA Institute and its ESG Technical Committee, chaired by Bruno Bertocci, managing director, head of sustainability in active equities, UBS Asset Management in the United States.

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