Proposals target investor protection issues

July 1, 2021

The International Organization of Securities Commissions (IOSCO) says more efforts are needed to curb greenwashing in the asset management industry and has called for feedback on planned recommendations surrounding sustainability-related regulatory and supervisory expectations.

A new report from the umbrella group of global securities regulators centres on investor protection issues and suggests regulators should set supervisory and regulatory expectations around risks and opportunities that are linked to sustainability for asset managers.

The IOSCO Consultation Report makes recommendations covering five areas: asset manager practices, policies, procedures and disclosure, product disclosure, supervision and enforcement, terminology and financial and investor education.

The policy forum, which regulates more than 95% of the world's securities markets in some 130 jurisdictions, said the recommendations aim to address existing gaps in skills and expertise, and the risk of fragmentation caused by divergent regulatory approaches.

Ashley Alder, IOSCO chair and CEO of the Securities and Futures Commission of Hong Kong said: “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.

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

The consultation report discusses asset managers’ sustainability-related practices and firm level disclosures, consistent with the Task Force on Climate-related Financial Disclosures (TFCD) recommendations.

It also highlights the need to address the challenges associated with the lack of reliability and comparability of data at the corporate level and the ESG data and ratings provided by third-party providers.

This latest report comes off the back of the IOSCO’s Sustainable Finance and the Role of Securities Regulators and IOSCO report in April 2020.

The call for comments from market participants is open until August 15.