INSIGHT by CFA Institute
New Standards seek to provide transparency and comparability of investment products with ESG-related features
|CFA Institute, the global association of investment professionals, announces today the publication of the Exposure Draft of its forthcoming voluntary, global Environmental, Social and Governance (ESG) Disclosure Standards for Investment Products (“the Standards”). The draft is an initial version of the Standards and seeks to elicit feedback on the Standards’ proposed principles, requirements, and recommendations.
“CFA Institute is recognized as an important global standard-setter, and the ESG Standards are another step towards ensuring transparency and safeguarding trust in our industry,” said Margaret Franklin, CFA, President and CEO of CFA Institute. “The pandemic has galvanized both interest and real action in ESG investing, and there is widespread support for standards that will bring greater clarity and efficiency to the identification, comparison and presentation of products with ESG-related features. These will be the primary benefits for all users of the Standards.”
Paul Andrews, Managing Director of Research, Advocacy and Standards at CFA Institute, added: “What sets the Standards apart from others is that they are suitable for all types of investment vehicles, all asset classes, all ESG strategies, and all markets. They harmonize many of the product-level ESG disclosure requirements found in existing regulations and other more narrowly-focused voluntary standards, as well as address gaps where no standards exist. The Standards will become the first global standards for product-level ESG disclosures.”
The Exposure Draft considers an ESG-related feature to be any aspect of an investment product’s strategy that uses ESG information or addresses ESG issues. Investment managers can apply the Standards regardless of how their investment products are named, labelled, or categorized. Additionally, the Exposure Draft proposes that investment managers have the flexibility to apply the Standards on a product-by-product basis rather than to all products, or at the firm level. The Exposure Draft contains disclosure requirements and recommendations that address the following elements of an investment product’s strategy:
- Objectives
- Benchmarks
- Sources and Types of ESG Information
- ESG Exclusions
- ESG Information in Financial Analysis and Valuation
- Portfolio-Level ESG Criteria and Characteristics
- Process to Achieve Impact Objective
- Stewardship
The Exposure Draft was written with the help of a technical committee composed of 18 international volunteers who have ESG expertise, as well as experience as asset owners, asset managers, consultants or service providers. It incorporates the public comments received on the Consultation Paper that was released in August 2020. CFA Institute now seeks input from the wider investment community to help shape the final version of the ESG Disclosure Standards for Investment Products scheduled for release in November 2021.
The Exposure Draft will be posted on the ESG Standards page of the CFA Institute website on 19 May 2021. Comments on the Exposure Draft must be submitted to standards@cfainstitute.org by 14 July 2021. Any individual, group, or organization may submit comments using the response form on the website.
See also: 20 August, 2020 – CFA Institute Publishes Consultation Paper on Disclosure Standards for Investment Products
9 September, 2020 – CFA Institute ESG Disclosure Standards: The Difference and the Aim|Gary Baker|Managing Director for EMEA, CFA Institute
26 February, 2021 – SFDR vs. CFA Institute ESG Disclosure Standards for Investment Products
| about
CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. Our aim is to create an environment where investors’ interests come first, markets function at their best, and economies grow. There are more than 178,000 CFA charterholders worldwide in 162 markets. CFA Institute has nine offices worldwide and there are 159 local member societies. For more information, visit www.cfainstitute.org or follow us on Twitter at @CFAInstitute and on Facebook.com/CFAInstitute.
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