IOSCO consults on sustainability practices in asset management

Erik Thedéen, chairman of IOSCO’s sustainable finance task force and director general of Sweden’s Finansinspektionen.

Securities regulators should be acting against greenwashing in the asset management industry, according to a new consultation report from the International Organisation of Securities Commissions (IOSCO) – Recommendations for Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management.

The umbrella group of global securities regulators report is requesting feedback on proposed recommendations about sustainability-related regulatory and supervisory expectations in asset management.

The report, which focuses on investor protection issues, proposes that securities regulators consider setting regulatory and supervisory expectations for asset managers regarding sustainability-related risks and opportunities.

The report also aims to improve sustainability-related practices, procedures and disclosures in the asset management industry generally.

In addition, the proposals look to address challenges such as existing gaps in skills and expertise and the risk of fragmentation caused by divergent regulatory approaches.

“The number of ESG investing and sustainability-related products has risen significantly in recent years, magnifying some crucial challenges, including concerns about the consistency and comparability of sustainability-related information and greenwashing,” said Ashley Alder, chairman of IOSCO and CEO of the Securities and Futures Commission of Hong Kong.

“This report sets out IOSCO’s view of the regulatory and supervisory expectations needed to support asset managers in addressing these challenges,” he added.

“This includes encouraging asset managers to take sustainability-related risks and opportunities into account in their investment decision-making and risk management processes and addressing the risk of greenwashing through improving transparency, comparability and consistency in sustainability-related disclosure,” IOSCO said.

Erik Thedéen, chairman of IOSCO’s sustainable finance task force and director general of Sweden’s Finansinspektionen, said, “Asset managers are at the heart of the investment chain and play a central role in the ecosystem of sustainability-related information. Sustainability-related policies and frameworks can therefore help ensure that asset managers take sustainability-related risks and opportunities into consideration and integrate them into their decision-making process,” said.

The paper also calls on regulators to ensure that they have adequate tools for overseeing asset managers and sufficient enforcement powers to address breaches of regulatory requirements.

“The recommendations aim to address various challenges, such as existing gaps in skills and expertise and the risk of fragmentation caused by divergent regulatory approaches. These challenges may further contribute to a lack of comparability for sustainability-related products, creating difficulties for investors’ monitoring and decision-making, and therefore facilitating greenwashing,” IOSCO said in a release.

The report also points to “a clear need to address the challenges associated with the lack of reliability and comparability of data at the corporate level and the [environmental, social and governance] data and ratings provided by third-party providers.”

©Markets Media Europe 2021

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