June 1, 2021
CFA Institute Publishes Exposure Draft of ESG Disclosure Standards for Investment Products

Up to date, modern Standards seek to bring about greater transparency and comparability of investment products alongside ESG-related features

The publication of the Exposure Draft of its pending voluntary, global Environmental, Social and Governance (ESG) Disclosure Standards for Investment Products (“the Standards”) has been announced by CFA Institute, the global association of investment professionals. The draft is a primary version of the Standards and looks to elicit feedback on the Standards’ proposed values, prerequisites, and suggestions.

“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 reflects on an ESG-related feature to be any aspect of an investment product’s strategy that utilises ESG data or looks at ESG issues. Investment managers are in a position to be able to apply the Standards regardless of how their investment products are named, labelled, or categorized. Moreover, the Exposure Draft offers that investment managers have the flexibility to apply the Standards on a basis of that of product-by-product rather than to all products, or at the firm level. The Exposure Draft includes disclosure requirements and recommendations that address the following elements of an investment product’s strategy:

  • ESG Information in Financial Analysis and Valuation
  • Portfolio-Level ESG Criteria and Characteristics
  • Process to Achieve Impact Objective
  • Stewardship
  • Objectives
  • Benchmarks
  • Sources and Types of ESG Information
  • ESG Exclusions

The Exposure Draft has been written in collaboration with the support offered from a technical committee composed of 18 international volunteers who have ESG expertise, in addition to 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. The CFA Institute is currently searching for input from the wider investment community to help shape the final version of the ESG Disclosure Standards for Investment Products scheduled for November 2021.

Download the Draft.

Source: CFA Institute