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CFA Institute Provides Guidance for Examining ESG Disclosure Standards

As ESG evolves, investment managers have a valid concern that authentic efforts to develop ESG funds or portfolios may run counter to the rapidly changing (and sometimes confusing) regulatory guidance. The lack of a universal standard creates hesitation that they may unintentionally fall out of compliance.

The good news is that providers are also adapting to help managers safeguard their approach. The CFA Institute (CFAI) is the most recent organization to take a major step in this regard. The organization developed its voluntary Global ESG Disclosure Standards for investment products in 2021, and now in 2023 it has issued a guide to examining investments for these standards. In a nutshell, CFAs who follow the procedures can ascertain whether ESG is being properly used and marketed.

What does it mean for investors?

The CFAI’s examination procedures are yet another tool for the current and incoming generation of Chartered Financial Analysts to help ensure that investors are exposed to financial vehicles they can trust.

CFAI puts its best. The Standards help “investors, consultants, advisors, and distributors better understand, compare, and evaluate investment products and diminishes the potential for ‘greenwashing.’”

What should Financial Advisors do?

Financial advisors should take note that despite the tremendous amount of noise and political rhetoric around ESG, the institutions that matter are taking diligent, thoughtful steps to ensure investors are protected. There is a learning curve to be sure, but clients of financial advisors are in better shape with each new initiative that emerges to properly vet investments and marketing that feature ESG.

Are you a financial advisor exploring how to market ESG to clients? Contact ESG Forward with your questions. We’d love to hear from you.

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