IOSCO final recommendations on sustainability-related practices, policies, procedures and disclosures in asset management

Written by Zhuan Faraj

On 2 November 2021, the International Organization of Securities Commissions (IOSCO) published its final report containing recommendations on sustainability-related practices, policies, procedures and disclosures in asset management (the “Final Report”). The guidance was drafted by IOSCO’s sustainable finance task force.

The final recommendations, reflecting the comments received on an earlier IOSCO consultation (June 2021), are:

• Asset Manager Practices, Policies, Procedures and Disclosure. Securities regulators and/or policymakers, as applicable, should consider setting regulatory and supervisory expectations for asset managers in respect of the: (a) development and implementation of practices, policies and procedures relating to material sustainability-related risks and opportunities; and (b) related disclosure.
• Product Disclosure. Securities regulators and/or policymakers, as applicable, should consider clarifying and/or expanding on existing regulatory requirements or guidance or, if necessary, creating new regulatory requirements or guidance, to improve product-level disclosure in order to help investors better understand: (a) sustainability-related products; and (b) material sustainability-related risks for all products.
• Supervision and Enforcement. Securities regulators and/or policymakers, as applicable, should have supervisory tools to monitor and assess whether asset managers and sustainability-related products are in compliance with regulatory requirements and enforcement tools to address any breaches of such requirements.
• Terminology. 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.
• Financial and Investor Education. Securities regulators and/or policymakers, as applicable, should consider promoting financial and investor education initiatives relating to sustainability, or, where applicable, enhance existing sustainability related initiatives.

The Final Report also includes various factual findings from the sustainability task force, including:

• In jurisdictions with sustainability-related requirements for asset managers at entity level, governance requirements are the most common.
• In jurisdictions with sustainability-related requirements at product level, there are differences in implementation and scope across jurisdictions.
• Almost half of respondent jurisdictions do not have sustainability-specific rules, but use existing non-specific rules to address sustainability-related risks and opportunities at asset manager level and sustainability-related products.
• Most member jurisdictions currently rely on existing supervisory and enforcement tools to address sustainability-related misconduct.

The Final Report can be accessed here.

For an overview of Burges Salmon’s work in Sustainable Finance and relevant contacts, see here.