LONDON- As environmental, social and governance (ESG) funds rack up trillions of dollars, global market watchdogs moved on Tuesday to flush out any asset managers who may be hoodwinking investors.
Regulators are playing catch-up to contain the risk of money managers overstating the ESG credentials of their products, with the value of such funds hitting a record $3.9 trillion at the end of the third quarter, Morningstar data shows.
Penalties for “greenwashing” have been few and far between.
Now IOSCO, which groups watchdogs from the United States, Europe, Asia and elsewhere has published recommendations which its members are obliged to apply when scrutinizing how asset managers sell funds which tout ESG good practice.
“Setting regulatory and supervisory expectations is therefore fundamental to addressing issues relating to risk mismanagement and greenwashing,” Erik Thedeen, head of Sweden’s financial markets watchdog and chair of the IOSCO taskforce which drafted the recommendations, said in a statement. – Reuters