IOSCO call for action to counter greenwashing risk

On 7 November 2022, the International Organization of Securities Commissions (IOSCO) published a call for action setting out Good Practices (GPs) for all voluntary standard setting bodies and industry associations operating in financial markets to promote among their members to counter the risk of greenwashing related to asset managers and ESG rating and data providers.

As part of the call for action, IOSCO promises to engage with voluntary standard setting bodies and industry associations to promote the adoption and implementation of the GPs amongst their members, as a baseline to address greenwashing and related investor protection concerns within the context of their domestic regulatory frameworks.

What does the call for action include?

The call for action sets out voluntary IOSCO GPs which are based on its November 2021 recommendations;

Section 1 is addressed to asset managers and includes GPs such as;

• clear expectations for asset managers regarding: (a) the development and implementation of
  practices, policies and procedures relating to material sustainability-related risks and opportunities; and (b) related disclosure;
• clear expectations regarding product-level disclosures to help investors better understand: (a)
  sustainability-related products; and (b) material sustainability-related risks and opportunities for all products;
• common sustainable finance-related terms and definitions, including those related to ESG
  approaches, to ensure consistency throughout the global asset management industry and comparability among sustainability related products;
• promoting or participating in financial and investor education initiatives relating to sustainability; and
• clear expectations regarding due diligence and/or the gathering and reviewing of information on the ESG ratings and data products that asset managers use in their internal processes.

Section 2 is addressed to ESG Rating and Data Providers and includes the following GPs;

• adopting and implementing written policies and procedures designed to help ensure the issuance of high quality ESG ratings and data products;
• adopting and implementing written policies and procedures designed to help ensure that their decisions are independent, free from political or economic interference;
• identifying, avoiding, or appropriately managing, mitigating, and disclosing potential conflicts of interest;
• making adequate levels of public disclosure and transparency a priority for their ESG ratings and data products;
• improving information gathering processes with entities covered by their products; and
• addressing issues flagged by entities covered by their ESG ratings and data products while maintaining the objectivity of these products.

Each section includes detailed guidance supporting the GPs.