Sustainability Guidelines for Asset Management Industry
The Asia Securities Industry and Financial Markets Association (ASIFMA) releases sustainability guidelines for the asset management industry, aimed at summarizing methods for incorporating sustainable practices into the asset management industry.
The ASIFMA believes that sustainability policies and investor sustainability preferences require the asset management industry to incorporate sustainability factors into governance and decision-making to mitigate the reputation and greenwashing risks.
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Sustainable Governance
The asset management industry needs to clarify the importance of sustainable development. In terms of governance, sustainable concepts and methods should be clarified by senior management, and sustainable goals should be supported by investment leaders to meet sustainable policies and provide corresponding products to customers. Asset management companies can create governance structure diagrams that illustrate how sustainable working groups or committees are incorporated into the governance structure and comply with risk management requirements in local jurisdictions.
Asset management companies also need to design cross functional sustainable investment policies to connect stakeholders such as investment, sales, risk, and compliance departments. These collaborations can include multiple aspects such as sustainable tools, guidelines, research, and monitoring of the sustainable features of products. For example, the compliance department will learn how to disclose sustainable information in fund prospectuses, annual reports, and other legal documents based on existing regulatory policies.
Sustainable Risk Management
Different jurisdictions have different attitudes towards sustainability, and for asset management companies operating globally, it is necessary to establish a comprehensive sustainability framework and adjust it according to local conditions. For example, companies operating in the European Union are required to comply with the Sustainable Finance Disclosure Regulation (SFDR), while companies operating in the UK are required to comply with the Sustainability Disclosure Requirements (SDR).
Asset management companies also need to pay attention to greenwashing risks when conducting business, that is, continuous information or statements that do not accurately reflect the sustainable characteristics of the company or product. The company needs to consider the anti-greenwashing rules issued by regulatory agencies and provide training to employees to understand the latest definition and expectations of greenwashing risks.
Sustainable Talent and Data
Asset management companies need to have sustainable talent to incorporate sustainability into their development. Singapore has released a sustainable finance transformation map, which mentions the sustainable skills required for different positions in the asset management industry. The company can consider hiring talent with sustainable investment experience and providing sustainable training to all employees. Companies can also incorporate sustainable goals into performance evaluations such as compensation to ensure the smooth implementation of sustainable goals.
To disclose sustainable information or obtain sustainable labels, asset management companies need to collect, organize, and analyze sustainable data. Some jurisdictions, such as Hong Kong and Singapore, have issued voluntary codes of conduct for ESG ratings and data providers, which asset management companies can refer to when adopting ESG data. Asset management companies can also apply ESG data solutions to investment analysis, risk management, and information disclosure to ensure consistency in output results.
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