Barcelona – The UN Principles for Responsible Investment, the Global Sustainable Investment Alliance and the CFA Institute have been working together over many years on joint programmes relating to ESG disclosure standards, definitions and understanding practices.
They are acutely aware of the increasing pressure on their members and signatories to clearly present approaches to ESG investment so that beneficiaries, regulators and other stakeholders are able to understand ESG approaches taken in investment products and strategies.
Our three organisations have recently formed a collaboration to work to refine, align, improve and harmonize their terms and definitions related to approaches to ESG investment
The objective is to produce an authoritative resource that:
- Describes and explains approaches to ESG investment,
- Clarifies and harmonizes terminology associated with these ESG investment approaches (and/or explains differences), and:
- Provides guidelines for the usage of such terminology.
This public resource is intended to be used by the investment industry, regulators and policy makers with the objective of providing greater clarity and alignment in their usage in literature and across the industry.
It is intended there will be a final paper covering a range of commonly used terms. The resource will be published in summer 2023 as working draft with the opportunity for comment before being finalised. It is intended to include provide essential concepts, a sample definition and guidance for usage.
They will review terms such as ESG integration, screening and stewardship.
David Atkin CEO UN PRI: ‘Increasing collaboration between global organisations such as the CFA, GSIA and PRI will be crucial in enabling our joint members and signatories to meet the evolving demands of regulators, stakeholders and asset owners’
Simon O’Connor Chair Global Sustainable investment Alliance: “This collaboration from three organisations with the broadest coverage of investment organisations and professionals across the globe will fill a crucial gap in the sustainable finance standards landscape. Now more than ever, it is critical that our industry falls in behind a clear and definitive set of standard definitions of responsible investment terminology and approaches. The absence of this clarity makes it harder for consumers to engage with responsible investment, and opens the door for greenwashing in our sector.”
RIA Canada is pleased to have directly supported this initiative, with staff participating in the Working Group and contributing to the development of clarity around definitions for RI strategies. RIA Canada’s latest research, the 2022 Canadian RI Trends report, confirms that clarity and consistency in definitions are needed to help address concerns about greenwashing, which was cited as the top deterrent to growth in RI in Canada.
- Confusion around the use of ESG terms has legal, compliance, and reputation risks for investment managers and hinders investors’ ability to find and invest in products that meet their needs and preferences.
- Investment managers and regulators continue to call for greater standardization of ESG terminology and guidance for using such terms in practice[i].
- In response to this call, this collaboration has been established to bring greater rigor and consistency to certain terminology associated with the techniques used to incorporate ESG information or issues into an investment product’s objectives or descriptions of investment process. It intends to provide clarification of certain ESG terms and provide guidelines for their usage in various contexts.
- It started in Autumn 2022 and the initial stage will last till Autumn 2023.
- It is planned the collaboration will jointly publish a paper(s) relating to a series of ESG-related terms along with sample definitions and recommendations for usage.
- These will be open for comment in summer 2023.
- Simon Simon O’Connor; Simonoc@responsibleinvestment.org;
- Toby Belsom; firstname.lastname@example.org;
- Chris Fidler; email@example.com.
Who are we:
- Global Sustainable Investment Alliance: GSIA | (gsi-alliance.org)
- UN Principles for Responsible Investment: PRI | Home (unpri.org)
- CFA Institute: CFA Institute
[i] For example, IOSCO’s Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management[i], issued 2 November 2021, recommends that “securities regulators and/or policymakers, as applicable, should consider encouraging industry participants to develop common sustainable finance-related terms and definitions, including relating to ESG approaches, to ensure consistency throughout the global asset management industry.”