CFA Institute’s draft ESG standards could facilitate “greenwashing,” IFIC says

By Mark Burgess | July 14, 2021 | Last updated on November 29, 2023
2 min read
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Without establishing standards for labelling environmental, social and governance (ESG) products, the CFA Institute’s proposed disclosure standards could lead to more “greenwashing” of investment funds, Canada’s fund industry lobby group says.

The Investment Funds Institute of Canada (IFIC) released its submission Wednesday to the CFA Institute’s consultation on its draft ESG disclosure standards for fund companies. In May, the CFA updated the architecture set out in an initial consultation paper that sought to match common client needs with six “ESG-related features” of funds.

The new draft disclosures aren’t meant to be a labelling standard and don’t require funds to meet certain thresholds to be considered ESG, sustainable, responsible or impact. Instead, fund companies would provide a three- to five-page “compliant presentation” outlining a fund’s ESG components.

“This limits their direct utility in providing advisors and retail investors with succinct and accessible information for identifying and comparing ESG products and aligning products with investment goals,” IFIC said in its submission.

The fund organization said the CFA should continue the work that was started in last summer’s consultation paper and develop standards for naming products.

“Without naming and categorization standards and established minimum standards for ESG product features, investors could confuse a ‘compliant presentation’ with one that achieves a standard of ESG investment practice,” IFIC said.

“In other words, the standards could facilitate rather than mitigate ‘greenwashing.'”

At the Responsible Investment Association’s virtual conference last month, CFA Institute senior director of global industry standards Chris Fidler said his organization “pivoted” with its second draft to avoid conflicting with the dozens of standards, codes and regulations that already exist in different jurisdictions.

The first round of consultations found a lack of agreement on the terminology used in the initial paper, which led the CFA to shift to plainer language, he said.

“Ours is a standard for the information that should be given to investors,” Fidler said. “There’s other types of standards that would say whether a product is responsible or not, or ethical or not, or sustainable or not, or green or not. But to get to that kind of standard or label, what you need to do is establish requirements. There’s a lot of debate as to what those words mean. In a lot of cases, it’s like beauty — it’s in the eye of the beholder.”

In its submission, IFIC said the “compliant presentation” would provide useful ESG information to third-party data providers, consultants and industry bodies to build ESG identification, categorization and certification frameworks, and other tools for investors. However, IFIC said the standards wouldn’t help advisors and retail investors compare ESG products.

IFIC also said the CFA Institute should require a template for the compliant presentation to make it easier to compare funds.

The consultation period for the draft disclosures ended on Wednesday. The CFA Institute plans to release the final standards in November.

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Mark Burgess

Mark was the managing editor of from 2017 to 2024.