IOSCO Finalises Guidance on Preventing Greenwashing in Funds

Outlines five recommendations for regulators to consider as they develop sustainability-related rules and regulations for asset managers.

The International Organisation of Securities Commissions (IOSCO) has published a set of final recommendations about sustainability-related practices, policies, procedures and disclosures in the asset management industry.

The recommendations have been published following a June consultation to address challenges associated with the growth of ESG investing and sustainability-related products, including the need for consistent, comparable, and decision-useful information and mitigating the risks posed by greenwashing.

The recommendations provide guidance to securities regulators seeking to improve sustainability-related disclosures and ensure asset managers take sustainability-related risks and opportunities into consideration.

Five key recommendations are provided for securities regulators and policymakers to consider as they develop sustainability-related rules and regulations:

  • Recommendation 1 involves 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, opportunities, and related disclosure.
  • Recommendation 2 involves clarifying and/or creating or expanding upon regulatory requirements or guidance to improve product-level disclosure in order to help investors better understand sustainability-related products and their risks.
  • Recommendation 3 involves the availability of supervisory tools to monitor and assess whether asset managers and sustainability-related products are in compliance with regulatory requirements and enforcement tools to address noncompliance.
  • Recommendation 4 involves 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.
  • Recommendation 5 involves promoting financial and investor education initiatives relating to sustainability and enhancing existing sustainability-related initiatives.

IOSCO’s report also presents fact-finding exercises to explore asset management practices and disclosure requirements used in member jurisdictions.

Approximately half of the responding jurisdictions do not have sustainability-specific rules and instead currently use existing non-sustainability-specific rules to address sustainability-related risks and opportunities at the asset manager level and sustainability-related products.

Even in jurisdictions with sustainability-specific requirements, the majority of securities regulators currently rely on existing supervisory and enforcement tools to address sustainability-related misconduct, such as providing false and misleading information relating to an asset manager’s or product’s commitment to sustainability.

A separate IOSCO report will be published later this month covering recommendations for ESG data and ratings providers. A consultation on this report was issued in July.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2024 ESG Investor Ltd. Company No. 12893343. ESG Investor Ltd, Fox Court, 14 Grays Inn Road, London, WC1X 8HN

To Top
Share via
Copy link
Powered by Social Snap