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.