NEW YORK, Dec. 15, 2021 /PRNewswire/ -- Asset managers face a long and growing list of questions, demands, and expectations from investors, financial regulators, and other stakeholders about their approach to sustainable investing. To help address market confusion, recent efforts have been made at harmonizing different frameworks and standards. Asset managers should be proactive in recognizing the areas of alignment between financial regulations and voluntary standards to inform how they communicate their approach to the market.
This is the main conclusion of a new whitepaper, "Making Sense of Sustainable Investing: How Asset Managers Can Comply with Financial Regulations and Align with Industry Standards," co-authored by BlueMark, a provider of impact verification services, and Morgan Lewis, a global law firm.
The paper explores recent milestones shaping the sustainable investment market, including the introduction of Sustainable Finance Disclosure Regulation (SFDR) requirements in Europe, the creation of the International Sustainability Standards Board (ISSB) by the International Financial Reporting Standards (IFRS) Foundation, and the launch of new reporting and disclosure standards by various industry bodies.
The authors found several areas of overlap between regulatory frameworks and market-based frameworks. The growing convergence between financial regulations and industry standards provides a basis for how asset managers should evaluate and refine their sustainable investing practices.
Specifically, the authors recommend asset managers follow a four-step process to both align their practices with existing frameworks and prepare for future requirements.
- Clarify the specific label or classification used for the sustainable investment strategy;
- Identify the practices necessary to substantiate the execution of the strategy;
- Identify applicable financial regulations and validate that existing practices and disclosures meet the relevant requirements; and
- Verify that practices and disclosures align with prevailing standards.
"Voluntary industry standards have played a critical role in shaping best practices for sustainable investors as the industry has matured," said Sarah Gelfand, Managing Director at BlueMark. "With regulators now bringing additional accountability to the market, asset managers face growing pressure to clearly define and defend their approach to sustainable investing."
"Many of our asset management clients are affected by these changes in the sustainable investing industry, especially as regulators ratchet up pressure with new rulemaking and enforcement," said Lance P. Dial, Partner at Morgan Lewis. "Successful compliance requires understanding how regulatory frameworks fit alongside industry standards."
The full report can be downloaded at https://bit.ly/3m69PgD.
BlueMark is a leading provider of impact verification services for investors and companies. Founded in January 2020 with a mission to "strengthen trust in impact investing," BlueMark's verification services are structured around the two key pillars of accountability for impact: Impact Management Practice (the extent to which an investor or company has the systems, processes, and capabilities to contribute to achieving the intended impact) and Impact Performance (the extent to which an investor or company has achieved the intended impact results). BlueMark draws on a range of industry standards, frameworks and regulations for its verification methodology, including GRI, IMP, OPIM, PRI, SDG Impact, and SFDR. Learn more at www.bluemarktideline.com.
About Morgan Lewis
Morgan Lewis is recognized for exceptional client service, legal innovation, and commitment to its communities. Our global depth reaches across North America, Asia, Europe, and the Middle East with the collaboration of more than 2,200 lawyers and specialists who provide elite legal services across industry sectors for multinational corporations to startups around the world. For more information about us, please visit www.morganlewis.com and connect with us on LinkedIn, Twitter, Facebook, Instagram, and WeChat.