ESG Information Disclosure Standards for Investment Products
With the continuous participation of regulatory authorities, enterprises, and the financial industry in the development of ESG, the attention to ESG issues is also increasing. In addition to traditional financial returns, some investors are beginning to consider the impact of investment products on the environment, society, and governance. However, there is currently no universal ESG information disclosure standard globally, which is also an important reason for the emergence of greenwashing.
In order to facilitate investors, financial advisors, and sales personnel to understand, evaluate, and compare these investment products, the CFA Institute has launched the ESG Information Disclosure Standards for Investment Products, aiming to provide a voluntary ESG disclosure standard for investment products and promote the development of the financial industry.
Principles of ESG Information Disclosure Standards
The CFA Institute believes that the ESG information disclosure standards for investment products are based on ethical principles of fair representation and complete disclosure, and are voluntary disclosures. This standard follows the following principles:
Complete: Investment products should not omit important information about ESG;
Reliable: Information disclosure of investment products should not mislead or deceive investors;
Consistency: The information disclosure of investment products needs to be consistent with public documents;
Clear: The information disclosure of investment products needs to be accurate and efficient;
Easy to access: The information disclosure of investment products should be easily accessible;
Compliance Basis for ESG Information Disclosure Standards
The CFA Institute believes that when investment managers adopt ESG disclosure standards, they need to comply with the ESG regulatory policies of their respective regions and fully comply with all aspects of the information disclosure standards. Investment managers cannot state incorrect information or omit important information in their disclosures, nor can they violate regulatory policies.
When investment managers use the disclosure standards published by the CFA Institute, they need to maintain them for at least one year. At the same time, the investment manager needs to record the disclosure procedures and save these documents. Investment managers also need to submit compliance forms to the CFA Institute and regularly update disclosure statements.
ESG Information Disclosure of Investment Products
The CFA Institute requires that the ESG information disclosure statement for investment products include the product name, investment manager name, applicable disclosure content, disclosure period, and relevant updates if necessary. Investment managers need to disclose an overview of the ESG methodology and provide specific explanations for specific ESG issues.
When investment activities involve ESG information, investment managers need to disclose the type, source, and usage of ESG information, as well as the risks and limitations of using this information. If financial substantial ESG information is used in investment decisions, it is also necessary to confirm this information and describe how it is included in the investment decision.
When using ESG index in investment products, investment managers need to describe the characteristics of the ESG index and how investors can obtain relevant information about the index. When investment products have portfolio level ESG goals, investment managers need to evaluate the ESG characteristics of the investment portfolio, disclose its measurement methods and target range, and describe its risks.
When investment products generate financial returns, they also need to generate social and environmental impacts. Investment managers need to disclose the objectives of these impacts (through measurable and observable terms) and relevant stakeholders, as well as how to measure, monitor, and evaluate these impacts, and how the results of these impacts are reported to investors. If the investment product complies to the above requirements, then it can declare that it is applicable to the disclosure standards.
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