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CFA Institute Publishes Consultation Paper on ESG Disclosure Standards for Investment Products

Standard seeks to provide transparency and comparability of the ESG-related features of investment products

New York City, United States 19 Aug 2020

CFA Institute, the global association of investment professionals, announced today the publication of a Consultation Paper seeking feedback on the proposed scope, structure, and design principles for its forthcoming voluntary, global Environmental, Social and Governance (ESG) Disclosure Standards for Investment Products (“the Standard”). In addition, CFA Institute is calling for volunteers to support the next phase of the Standard’s development.

“Setting global industry standards to ensure transparency and safeguard trust is integral to our mission,” said Margaret Franklin, CFA, President and CEO of CFA Institute. “In the face of growing interest in ESG investing, we found widespread support from the investment community for the development of a standard to reduce confusion and facilitate better alignment of investor objectives with product intent. The ESG Disclosure Standards for Investment Products will add to our current offering, including the Global Investment Performance Standards (GIPS®) and the Asset Manager Code™.”

“The Standard will primarily focus on disclosure requirements for investment products with ESG-related features so that investors can more comprehensively evaluate whether or not an investment product will meet their needs,” said Chris Fidler, Senior Director, Global Industry Standards, CFA Institute. “It is distinctly different from other standards that seek to establish disclosure requirements for corporate issuers, prescribe requirements for the labeling or rating of securities or investment products, or define best practice for a particular strategy or approach.”

The Consultation Paper was written with the help of a working group of 15 international volunteers who have ESG expertise, as well as experience as asset owners, asset managers, consultants or service providers.

The Consultation Paper defines ESG-related features as components or capabilities of investment products that can be combined in different ways to meet different investor needs. It goes on to propose definitions for six ESG-related features, listed briefly here. The features are expected to serve as a backbone of the Standard in that they are a mechanism to connect investor needs and disclosure requirements.

  1. ESG Integration: Explicitly considers ESG-related factors that are material to the risk and return of the investment, alongside traditional financial factors, when making investment decisions.
  2. ESG-Related Exclusions: Excludes securities, issuers, or companies from the investment product based on certain ESG-related activities, business practices, or business segments.
  3. Best-in-Class: Aims to invest in companies and issuers that perform better than peers on one or more performance metrics related to ESG matters.
  4. ESG-Related Thematic Focus: Aims to invest in sectors, industries, or companies that are expected to benefit from long-term macro or structural ESG-related trends.
  5. Impact Objective: Seeks to generate a positive, measurable social or environmental impact alongside a financial return.
  6. Proxy voting, Engagement and Stewardship: Uses rights and position of ownership to influence issuers’ or companies’ activities or behaviors.

CFA Institute now seeks input from the wider investment community to help shape an Exposure Draft, an initial version of the ESG Disclosure Standards for Investment Products, which is expected to be released in May 2021.

“We know from experience that it is vital to have diverse perspectives in the formulation of global standards. We are seeking input from individuals, groups and organizations around the world in the form of comment letters, as well as individuals to participate in volunteer committees,” Fidler continued.

The Consultation Paper, a response form for providing comments (due by 19 October 2020), and volunteer opportunities (apply by 23 September 2020) are available on our ESG Standards page.

About CFA Institute
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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