CFA seeks industry views on new ESG disclosure standard

The consultation comes days after Barclays researchers called on portfolio managers to be “more transparent” about their products.


Joe McGrath

CFA Institute has announced plans for a new ESG disclosure standard for investment products and has opened a consultation with investment professionals for their views.

The consultation, announced on 20 August, invites industry experts to put forward their views on whether a standard is needed to help investors compare investment products more easily, particularly those with specific ESG-related features.

“Setting global industry standards to ensure transparency and safeguard trust is integral to our mission,” said Margaret Franklin, president and chief executive officer of CFA Institute (pictured).

“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 decision to consult on a future standard comes days after research conducted by Barclays suggested that dedicated benchmarks were needed for products, to enable clients to better compare funds.

“Portfolio managers need to be more transparent about why their products qualify as sustainable,” Barclays said.

“Investors need to do far more due diligence to ensure that their investments do indeed align with their objectives.”

The latest CFA consultation explores whether any terms currently used in the market could be described as “ambiguous” and asks the industry to clarify how they could be better clarified.

Major financial institutions such as BlackRock, MSCI and UBS are among those having informed the approach in the latest CFA consultation.

The research also asks whether the new CFA standard should focus only on product level disclosures or look additionally at firm-level disclosures.

“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 at the CFA Institute.

“It is distinctly different from other standards that seek to establish disclosure requirements for corporate issuers, prescribe requirements for the labelling or rating of securities or investment products, or define best practice for a particular strategy or approach.”

Those interested in responding to the consultation, can do so here.

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