19 May 2021

CFA Institute Publishes Exposure Draft of ESG Disclosure Standards for Investment Products

CFA Institute, the global association of investment professionals, announces today the publication of the Exposure Draft of its forthcoming voluntary, global Environmental, Social and Governance (ESG) Disclosure Standards for Investment Products (“the Standards”). The draft is an initial version of the Standards and seeks to elicit feedback on the Standards’ proposed principles, requirements, and recommendations.

“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,” said Margaret Franklin, CFA, President and CEO of CFA Institute. “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.”

Paul Andrews, Managing Director of Research, Advocacy and Standards at CFA Institute, added: “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 Exposure Draft considers an ESG-related feature to be any aspect of an investment product’s strategy that uses ESG information or addresses ESG issues. Investment managers can apply the Standards regardless of how their investment products are named, labelled, or categorized. Additionally, the Exposure Draft proposes that investment managers have the flexibility to apply the Standards on a product-by-product basis rather than to all products, or at the firm level. The Exposure Draft contains disclosure requirements and recommendations that address the following elements of an investment product’s strategy:

• Objectives
• Benchmarks
• Sources and Types of ESG Information
• ESG Exclusions
• ESG Information in Financial Analysis and Valuation
• Portfolio-Level ESG Criteria and Characteristics
• Process to Achieve Impact Objective
• Stewardship

The Exposure 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. It incorporates the public comments received on the Consultation Paper that was released in August 2020. CFA Institute now seeks input from the wider investment community to help shape the final version of the ESG Disclosure Standards for Investment Products scheduled for release in November 2021.

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