On June 30, IOSCO published for comments proposed recommendations about sustainability-related regulatory and supervisory expectations in asset management.
The Consultation Report includes 5 recommendations listed below:
1/Asset Manager Practices, Policies, Procedures and Disclosure
IOSCO recommends that Securities regulators and/or policymakers sets regulatory and supervisory expectations for asset managers for the
Development and implementation of practices, policies and procedures relating to sustainability-related risks and opportunities. This will help ensure that asset managers take sustainability-related risks and opportunities into consideration and integrate them into their decision-making process.
Related disclosure to promote consistency, comparability, and reliability in disclosure to help prevent greenwashing at the asset manager level. To do so, asset managers could reference the Task Force on Climate-related Financial Disclosures (TCFD) Framework in their disclosures of climate-related risks and opportunities.
The related practices, policies and procedures could cover aspects such as governance, investment strategy, risk management and metrics & targets.
2/Product Disclosure
Clarification of existing regulatory requirements or creation of new ones should be considered by securities regulators and/or policymakers to enhance product-level disclosure in order to help investors better understand: (a) sustainability-related products; and (b) material sustainability-related risks for all products.
The requirements or guidance relating to product-level disclosure could cover areas such as (i) product authorisation, (ii) naming, (iii) investment objectives disclosures, (iv) investment strategies disclosure, (v) proxy voting and shareholders engagement disclosure, (vi) risk disclosure, (vii) marketing materials and website disclosure and so forth.
3/Supervision and Enforcement.
With the recommendation for securities regulators and/or policymakers to have supervisory tools to ensure that asset managers and sustainability-related products are in compliance with regulatory requirements and enforcement tools to address any breaches of such requirements. This is to help prevent greenwashing at both the asset manager and product levels and promote investor confidence in asset managers.
4/Terminology
Encouraging industry participants to develop common sustainable finance-related terms and definitions will promote consistency throughout the global asset management industry.
5/Financial and Investor Education
IOSCO recommends that securities regulators and/or policymakers promotes or enhances financial and investor education initiatives relating to sustainability to help
Protect investors from greenwashing
Promote awareness of sustainability-related risk
Encourage the continued growth of sustainability-related asset management products
Foster a greater understanding of the benefits and risk profiles of sustainability-related products relative to other products.
Comments are to be submitted before 15 August 2021.