Fund managers should be subject to more rigorous standards to ensure their disclosures about ESG (Environmental, Social and Governance) investing are accurate.
Stoic Venture Capital Partner Geoff Waring said Australia should take the lead of the United States, European Union and United Kingdom by ramping up its scrutiny of ESG disclosure and compliance.
Investors are becoming increasingly ESG-aware and correspondingly more distrustful of greenwashing funds that claim to comply with ESG investing principles but in reality do not.
“Many investors are concerned about the hazy reporting of fund managers when it comes to their ESG investments,” Dr Waring said.
“There is a lack of consistency and regulation in how funds report ESG investments and how ESG principles are integrated into their investment decisions and strategy and the impact this has on their returns.”
Dr Waring said it was time the investor industry associations such as the Institutional Limited Partners Association stepped in to address the growing concerns of investors about the problem of greenwashing.
Rather than just educating participants about ESG standardised processes they should act as a centralised platform for independent ratings and benchmarks of fund managers’ ESG compliance. Cambridge Associates calculate benchmarks for financial returns so could do it for social impact too, he said.
It was also important given the ongoing growth in responsible investing which represents around 37% of total $3.135 billion assets under management according to the Responsible Investment Association Australasia’s annual Responsible Investment Benchmark Report 2020. The responsible investment market grew 17% in 2019 to $1.149 billion.
“Stronger, more consistent guidelines and