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November 3, 2023

New Standards for Responsible Investments

by Detlef Glow.

On November 1, 2023, the UN PRI published in cooperation with the CFA Institute (CFA) and the Global Sustainable Investment Alliance (GSIA) Definitions for Responsible Investment Approaches, with the aim to refine and harmonize terminology to provide common definitions for the essential elements of five responsible investment approaches.

From my point of view, such a harmonized language about responsible investment approaches is much needed because we see that asset managers and investors use different terms to describe the same investment approach or vice versa. This causes some confusion, since asset managers are not sure if they can fulfill the requirements of investors, while investors don’t understand if and how a respective investment approach is used in the portfolio management processes.

I am pretty sure that these definitions are much appreciated and will help to align the communication between asset managers, investors, regulators, and policymakers.

Despite the clear aim of this initiative, some investors may have expected further clarifications and definitions of the investment approaches and their respective outcomes. Some may have expected that this initiative would separate “good” and “bad” approaches, or add minimum criteria, but that was not the aim of this initiative. Therefore, any claims that there are details on methodologies, etc. missing, are misled by expectations and not by focusing on the aim of this initiative. These claims remind me somewhat of the discussion around SFDR, where investors expected a classification scheme and used the assigned articles in their fund selection processes even though the EU Commission and ESMA always stated that SFDR is not a classification scheme at all.

 

This article is for information purposes only and does not constitute any investment advice.

The views expressed are the views of the author, not necessarily those of Refinitiv Lipper or LSEG.

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