Asset Management and ESG: Need for Regulatory Intervention

Synopsis: In recent times, the asset management industry has increasingly been put on the spot regarding the way they have been using ESG in their marketing communication for investment products and how they have been disclosing sustainability-related information. There have also been some unsavory incidents around misrepresentation of facts and exaggerated claims about the sustainability credentials of their offerings. Usage of ESG filter in investment decisions has seen an erratic growth. There has also been indiscriminate marketing of sustainability-related investment products in the asset management industry. Because of it, there is an emerging consensus that regulators must act and address these issues. A few days ago, the Board of the International Organization of Securities Commissions (IOSCO) published a final Report titled ‘Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management’ with an aim to improve sustainability-related disclosures in the asset management industry through its recommendations for securities regulators and policy-makers. IOSCO clearly and correctly points out that regulators must issue clear guidelines to asset managers as there is a need to distinctly measure progress on important ESG parameters. In addition, there is also a need for consistent and comparable information to tackle risks such as greenwashing. While the recommendations made by IOSCO are sensible, we think that they are too generic for regulators to follow. Policy-makers need to develop them further as per the local requirements to make a real impact. As the ESG space evolves and the system gets more structured, asset managers would need to take care of the basics including, a) focus on integrity of the process, b) clarity (without exaggeration) in communication and c) complete and unambiguous disclosure.

The Covid-19 Induced Global Chip Shortage

When Covid-19 hit the world in early 2020, a pall of gloom hung over the global economy and uncertainty ruled the day. The future was pretty much unchartered and countries and companies around the globe started swinging in the dark. The current chip shortage is the result of the unexpected ways in which the global industries’ demand has played out for the chips.

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