The Board of the International Organization of Securities Commissions (IOSCO) published report that sets out recommendations on sustainability-related practices, policies, procedures, and disclosures in the asset management industry. This report reflects the feedback received in response to a June 2021 consultation and focuses on asset manager practices and disclosures, product disclosures, supervision and enforcement, development of common sustainable finance terminology, and financial and investor education. The report recognizes a need to address challenges associated with the lack of reliability and comparability of data at the corporate issuer level and the environmental, social, and governance (ESG) data and ratings provided by third-party providers to enable the investment industry to properly evaluate sustainability-related risks and opportunities. IOSCO intends to publish a separate report later in November 2021 and will cover recommendations for ESG data and ratings providers.
The recommendations in the report cover a range of areas, all of which can help prevent greenwashing. For instance, requirements relating to the disclosure of material risks for sustainability-related products can help prevent greenwashing by enabling investors to better understand the potential risks associated with the product and the impact of those risks on a product’s performance, including sustainability-related performance. Similarly, requirements related to naming for sustainability-related products can help prevent greenwashing by ensuring that products that identify themselves as sustainability-related through their names are accurately reflecting their focus on sustainability. The recommendations also address the risk of greenwashing through other areas, including supporting sustainability-related financial and investor education initiatives and ensuring that there are adequate supervisory and enforcement tools to monitor and assess compliance with requirements in this area and address breaches of such requirements. As per the final recommendations, securities regulators and/or policymakers should
- consider setting regulatory and supervisory expectations for asset managers in respect of the development and implementation of practices, policies and procedures relating to material sustainability-related risks and opportunities; and related disclosure.
- consider clarifying and/or expanding on existing regulatory requirements or guidance or, if necessary, creating new regulatory requirements or guidance, to improve product-level disclosure to help investors better understand sustainability-related products and material sustainability-related risks for all products.
- have supervisory tools to monitor and assess whether asset managers and sustainability-related products are in compliance with regulatory requirements and enforcement tools to address any breaches of such requirements.
- consider encouraging industry participants to develop common sustainable finance related terms and definitions, including relating to ESG approaches, to ensure consistency throughout the global asset management industry.
- consider promoting financial and investor education initiatives relating to sustainability, or, where applicable, enhance existing sustainability related initiatives.
Keywords: International, Banking, Securities, ESG, Disclosures, Greenwashing, Sustainable Finance, Asset Management, IOSCO
Previous ArticleFSC Taiwan Fines Cathay United Bank, Extends Payment Deferrals
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.