Global investment professional association CFA Institute announce the launch of the initial draft version of its new ESG Disclosure Standards for Investment Products, aimed at providing transparency and comparability of investment products with ESG-related features.

The organization is establishing the standards as ESG-themed investment products as major capital flows are being directed towards sustainable investments, resulting in a major proliferation in ESG-themed products and strategies. In its recent position paper on ESG integration, the CFA Institute noted the rapid evolution in the ESG investing landscape, and the emergence of reporting standards for companies and investors, including the EU Taxonomy and the Non-Financial Reporting Directive (NFRD), as well as the ongoing development of standards by bodies such as SASB, TCFD and IFRS.

Margaret Franklin, CFA, President and CEO of CFA Institute, said:

“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. 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.”

The publication follows a consultation on the development of the standards launched by CFA Institute in August 2020. The 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, incorporates the public comments received from the consultation.

According to CFA Institute, the standards are meant to be applied by investment managers regardless of how their investment products are named, labelled, or categorized, with any aspect of an investment product’s strategy that uses ESG information or addresses ESG issues is considered an ESG-related feature. The draft contains disclosure requirements and recommendations addressing multiple elements of an investment product’s strategy, including its objectives, benchmarks, sources and types of ESG information, and ESG exclusions, as well as ESG information in Financial Analysis and Valuation, portfolio-level ESG criteria and characteristics, the process to achieve impact objectives, and stewardship.

Paul Andrews, Managing Director of Research, Advocacy and Standards at CFA Institute, said:

“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 CFA Institute is seeking commentary on the draft through July 14, 2021. Click here to view the draft.

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